After fifteen years trading equities the insight hit me like a sledgehammer…
A casual conversation with John Locke turned into one of those movie scenes where the actor wakes up from a deep sleep with a new mission.
In my case it was a new thought process of how traders actually earn money. Now keep in mind here I am not talking about how to place trades but how to get paid. To put it bluntly, this seemingly innocent comment John tossed at me rocked my world.
The Outcome Is The Same, But The Mindset To Get There Is Drastically Different.
Equity trading is about price, stop-loss and profit targets. Options trading is about a time frame and windows of opportunities. Forty Five days and a price range between $150-$190; for example.
When you enter a new equity trade, your focus is on your entry price and your P and L. You are focused on static points and an undefined point in time for the trade to create opportunity or loss.
“Static and undefined” leaves a lot of room to get antsy about the result.
Here is the difference that John made me realize: Options trades are designed from the start to know how the ending looks and how long you have for that ending to happen. And it gets better. Most options trades have a window of opportunity within which they will earn money in a trade and multiple scenarios to earn a profit. In equities trading, you make a directional call. That’s it. One scenario and only one scenario makes a profit.
And it gets better. John explained that the trades that he employs have predetermined trade built into the trade management. He is expecting to need to adjust the trade. As long as the stock or index trades within a window of prices, within a certain time period, the probabilities are on his side.
Why This Is a Dramatic Difference
Options trading, as John teaches, focuses on holding and adjusting to the end. Hold and adjust for a certain designated time period, within a “price tent.” Its brilliant. The focus is on the end goal and adjustments are expected and planned. “We work the trade in a price range and adjust the window if necessary until the trade duration has expired.”
I have made too much money trading equities to say that options trading is “better” as John teaches and trades. I am, however, saying that multiple potential outcomes to earn money and a focus on the end is a seismic shift in trade management.
Learn the Process from John Locke
Sometimes good ideas can get lost in translation. I recommend you hear the insights from John himself at his next live event on May 29th. See if you agree with me.
No relevant positions