{"id":49522,"date":"2020-01-16T17:31:02","date_gmt":"2020-01-16T22:31:02","guid":{"rendered":"https:\/\/www.smbtraining.com\/blog\/?p=49522"},"modified":"2023-06-08T12:00:56","modified_gmt":"2023-06-08T16:00:56","slug":"our-huge-options-trading-blunders-series-episode-1","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/our-huge-options-trading-blunders-series-episode-1","title":{"rendered":"Our Huge Options Trading Blunders Series (Episode 1): Learning from Mistakes"},"content":{"rendered":"

This video is the first of a series of ten videos that we’ll be producing as cautionary warnings about the largest mistakes that options traders make and how they can rectify those mistakes. The first Options blunder we’ll cover in this video is about the disastrous consequences of getting cocky and sizing up too quickly as an options income trader.<\/p>\nView Video Transcript<\/strong><\/span>

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today’s video is the first in a 10 part<\/div>\n<\/div>\n<\/div>\n
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series that we’ve decided to produce for<\/div>\n<\/div>\n<\/div>\n
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traders who are really serious about<\/div>\n<\/div>\n<\/div>\n
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trading options for a living and taking<\/div>\n<\/div>\n<\/div>\n
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the proper steps at the proper pace to<\/div>\n<\/div>\n<\/div>\n
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seriously improve an Excel<\/div>\n<\/div>\n<\/div>\n
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I’m the head trader of SMB capitals<\/div>\n<\/div>\n<\/div>\n
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options trading desk and I can tell you<\/div>\n<\/div>\n<\/div>\n
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for many years of experience that the<\/div>\n<\/div>\n<\/div>\n
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pitfalls we’re gonna be describing in<\/div>\n<\/div>\n<\/div>\n
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these videos are real and if you’re<\/div>\n<\/div>\n<\/div>\n
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serious about trading for a living<\/div>\n<\/div>\n<\/div>\n
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you’re gonna take good notes and really<\/div>\n<\/div>\n<\/div>\n
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internalize the points we’re gonna be<\/div>\n<\/div>\n<\/div>\n
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raising if you’re actually serious about<\/div>\n<\/div>\n<\/div>\n
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changing careers and trading full-time<\/div>\n<\/div>\n<\/div>\n
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as an options trader then I urge you to<\/div>\n<\/div>\n<\/div>\n
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watch this series of videos that we’ll<\/div>\n<\/div>\n<\/div>\n
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be releasing over the coming weeks and<\/div>\n<\/div>\n<\/div>\n
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months so that you don’t fall by the<\/div>\n<\/div>\n<\/div>\n
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wayside like so many aspiring traders<\/div>\n<\/div>\n<\/div>\n
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who don’t want to spend the time to<\/div>\n<\/div>\n<\/div>\n
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learn the actual truth about the<\/div>\n<\/div>\n<\/div>\n
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challenges and rewards of trading<\/div>\n<\/div>\n<\/div>\n
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[Music]<\/div>\n<\/div>\n<\/div>\n
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hi I’m Seth Freiburg and I’m the head<\/div>\n<\/div>\n<\/div>\n
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trader of SMB capitals options trading<\/div>\n<\/div>\n<\/div>\n
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desk SMB capital is a proprietary<\/div>\n<\/div>\n<\/div>\n
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trading firm located in midtown<\/div>\n<\/div>\n<\/div>\n
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Manhattan and we provide capital for<\/div>\n<\/div>\n<\/div>\n
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options and equity traders from all over<\/div>\n<\/div>\n<\/div>\n
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the world trading both remotely and in<\/div>\n<\/div>\n<\/div>\n
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our offices here in New York City now<\/div>\n<\/div>\n<\/div>\n
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I’d like to suggest that you click on<\/div>\n<\/div>\n<\/div>\n
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our subscribe button right now so that<\/div>\n<\/div>\n<\/div>\n
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you don’t miss any of our free trading<\/div>\n<\/div>\n<\/div>\n
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videos that we produce for traders and<\/div>\n<\/div>\n<\/div>\n
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investors all over the world they’re<\/div>\n<\/div>\n<\/div>\n
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really very valuable ok so as I<\/div>\n<\/div>\n<\/div>\n
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mentioned we’ve assembled 10 lessons on<\/div>\n<\/div>\n<\/div>\n
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the realities of options trading and the<\/div>\n<\/div>\n<\/div>\n
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blunders that you have to avoid if<\/div>\n<\/div>\n<\/div>\n
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you’re serious about trading for a<\/div>\n<\/div>\n<\/div>\n
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living this is basically a series<\/div>\n<\/div>\n<\/div>\n
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focused on all sorts of foolish thoughts<\/div>\n<\/div>\n<\/div>\n
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that people have about options trading<\/div>\n<\/div>\n<\/div>\n
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all sorts of ridiculous blunders they<\/div>\n<\/div>\n<\/div>\n
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make and just how dangerous they really<\/div>\n<\/div>\n<\/div>\n
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are if you fall into any of these traps<\/div>\n<\/div>\n<\/div>\n
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you can cost yourself a great deal of<\/div>\n<\/div>\n<\/div>\n
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money or forego a great deal of<\/div>\n<\/div>\n<\/div>\n
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opportunity which is just as unfortunate<\/div>\n<\/div>\n<\/div>\n
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worse you could get so discouraged<\/div>\n<\/div>\n<\/div>\n
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that you’d quit before you realize that<\/div>\n<\/div>\n<\/div>\n
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you actually have a natural talent for<\/div>\n<\/div>\n<\/div>\n
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trading and that would be tragic<\/div>\n<\/div>\n<\/div>\n
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either way I’m urging you to take me<\/div>\n<\/div>\n<\/div>\n
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seriously today if for no other reason<\/div>\n<\/div>\n<\/div>\n
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than this these are not just some<\/div>\n<\/div>\n<\/div>\n
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principles that I’ve developed out of<\/div>\n<\/div>\n<\/div>\n
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theory or for some book these are actual<\/div>\n<\/div>\n<\/div>\n
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experience that I’ve had trading<\/div>\n<\/div>\n<\/div>\n
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personally and professionally in other<\/div>\n<\/div>\n<\/div>\n
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words I’ve made every one of these<\/div>\n<\/div>\n<\/div>\n
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mistakes myself and suffered the<\/div>\n<\/div>\n<\/div>\n
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consequences myself and so that’s why<\/div>\n<\/div>\n<\/div>\n
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I’m so passionate about helping all of<\/div>\n<\/div>\n<\/div>\n
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you to avoid these same mistakes and<\/div>\n<\/div>\n<\/div>\n
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have a much smoother ride to trading<\/div>\n<\/div>\n<\/div>\n
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success I honestly believe that these<\/div>\n<\/div>\n<\/div>\n
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videos are about the most important that<\/div>\n<\/div>\n<\/div>\n
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I can share with you I mean we could<\/div>\n<\/div>\n<\/div>\n
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talk about great option strategies great<\/div>\n<\/div>\n<\/div>\n
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setups trades with very high win rates<\/div>\n<\/div>\n<\/div>\n
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and high returns and all of that is<\/div>\n<\/div>\n<\/div>\n
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solid information but if you fall into<\/div>\n<\/div>\n<\/div>\n
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these traps that the market and your own<\/div>\n<\/div>\n<\/div>\n
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psychology has laid for you then all of<\/div>\n<\/div>\n<\/div>\n
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its gonna be for naught you will blow up<\/div>\n<\/div>\n<\/div>\n
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your account and never be able to trade<\/div>\n<\/div>\n<\/div>\n
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any of these strategies so what’s the<\/div>\n<\/div>\n<\/div>\n
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point so these are actually very very<\/div>\n<\/div>\n<\/div>\n
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important lessons that can mean the<\/div>\n<\/div>\n<\/div>\n
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difference between you’re actually<\/div>\n<\/div>\n<\/div>\n
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making it as a trader or flaming out<\/div>\n<\/div>\n<\/div>\n
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quickly<\/div>\n<\/div>\n<\/div>\n
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is you’re approaching the learning<\/div>\n<\/div>\n<\/div>\n
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process wrong<\/div>\n<\/div>\n<\/div>\n
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it’s your choice honestly okay so today<\/div>\n<\/div>\n<\/div>\n
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we’re gonna focus on the first blunder<\/div>\n<\/div>\n<\/div>\n
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that I’d like to share with you and that<\/div>\n<\/div>\n<\/div>\n
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is the foolish belief that you’ll trade<\/div>\n<\/div>\n<\/div>\n
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five hundred thousand dollars in capital<\/div>\n<\/div>\n<\/div>\n
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the same way that you currently trade a<\/div>\n<\/div>\n<\/div>\n
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five thousand dollar trading account I<\/div>\n<\/div>\n<\/div>\n
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mean it’s sort of obvious that that<\/div>\n<\/div>\n<\/div>\n
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statement is not true but many beginning<\/div>\n<\/div>\n<\/div>\n
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traders can fall into the trap of<\/div>\n<\/div>\n<\/div>\n
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believing that and here’s how it<\/div>\n<\/div>\n<\/div>\n
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develops now I want you to pay close<\/div>\n<\/div>\n<\/div>\n
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attention because if this sounds like<\/div>\n<\/div>\n<\/div>\n
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something you yourself have been<\/div>\n<\/div>\n<\/div>\n
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thinking you definitely need to watch<\/div>\n<\/div>\n<\/div>\n
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the rest of this video so here’s how it<\/div>\n<\/div>\n<\/div>\n
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goes it starts with someone who figures<\/div>\n<\/div>\n<\/div>\n
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he can get rich quick if he learns how<\/div>\n<\/div>\n<\/div>\n
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to trade or maybe he wants to quit his<\/div>\n<\/div>\n<\/div>\n
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job because he’s sick of it and bored by<\/div>\n<\/div>\n<\/div>\n
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it and he figures he’d have a lot more<\/div>\n<\/div>\n<\/div>\n
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fun trading options for a living so<\/div>\n<\/div>\n<\/div>\n
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that’s what he wants to do now getting<\/div>\n<\/div>\n<\/div>\n
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real about this you’re not going to get<\/div>\n<\/div>\n<\/div>\n
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rich quick trading it takes extensive<\/div>\n<\/div>\n<\/div>\n
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training you can get rich quick by<\/div>\n<\/div>\n<\/div>\n
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hitting the lottery but if you want to<\/div>\n<\/div>\n<\/div>\n
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build wealth properly over time you need<\/div>\n<\/div>\n<\/div>\n
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to understand that it will take time and<\/div>\n<\/div>\n<\/div>\n
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education and anyone who tells you<\/div>\n<\/div>\n<\/div>\n
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otherwise is not being straight with you<\/div>\n<\/div>\n<\/div>\n
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please believe me on this you can get<\/div>\n<\/div>\n<\/div>\n
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there but you need to do it the right<\/div>\n<\/div>\n<\/div>\n
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way so you can’t just go and quit your<\/div>\n<\/div>\n<\/div>\n
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job with the dream that you’ll be a<\/div>\n<\/div>\n<\/div>\n
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trading tycoon in a few weeks it does<\/div>\n<\/div>\n<\/div>\n
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not work that way you need to have a new<\/div>\n<\/div>\n<\/div>\n
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career or a new skill that you’ve<\/div>\n<\/div>\n<\/div>\n
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developed properly over a period of<\/div>\n<\/div>\n<\/div>\n
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education before you take a career risk<\/div>\n<\/div>\n<\/div>\n
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and quit your job prematurely so if any<\/div>\n<\/div>\n<\/div>\n
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of this sounds like you you really need<\/div>\n<\/div>\n<\/div>\n
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to keep listening to what I’m saying<\/div>\n<\/div>\n<\/div>\n
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here ok so let’s say that someone takes<\/div>\n<\/div>\n<\/div>\n
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a course an options income trading which<\/div>\n<\/div>\n<\/div>\n
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is something that we teach here at SMB<\/div>\n<\/div>\n<\/div>\n
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so his expectations are that hey it’s<\/div>\n<\/div>\n<\/div>\n
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called options income trading so if I<\/div>\n<\/div>\n<\/div>\n
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take this course it will replace my<\/div>\n<\/div>\n<\/div>\n
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income and I’ll just be able to pay my<\/div>\n<\/div>\n<\/div>\n
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bills each month and eventually start<\/div>\n<\/div>\n<\/div>\n
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buying expensive cars going on exotic<\/div>\n<\/div>\n<\/div>\n
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vacations etc if I just take this course<\/div>\n<\/div>\n<\/div>\n
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and do what they say after a few weeks<\/div>\n<\/div>\n<\/div>\n
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of intensive study I’ll be set for life<\/div>\n<\/div>\n<\/div>\n
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that’s because they don’t understand<\/div>\n<\/div>\n<\/div>\n
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that just because this practice is<\/div>\n<\/div>\n<\/div>\n
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commonly known as options income trading<\/div>\n<\/div>\n<\/div>\n
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it doesn’t mean that every trade will<\/div>\n<\/div>\n<\/div>\n
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produce income<\/div>\n<\/div>\n<\/div>\n
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for you what it does mean is that if you<\/div>\n<\/div>\n<\/div>\n
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develop the proper trading skills you<\/div>\n<\/div>\n<\/div>\n
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can produce a high enough return over<\/div>\n<\/div>\n<\/div>\n
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time that you can do this for a living<\/div>\n<\/div>\n<\/div>\n
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if you persist in your education and<\/div>\n<\/div>\n<\/div>\n
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professionalism we’ve got a floor full<\/div>\n<\/div>\n<\/div>\n
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of traders here at SMB to bear witness<\/div>\n<\/div>\n<\/div>\n
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to that fact ok so let’s take a<\/div>\n<\/div>\n<\/div>\n
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hypothetical guy who takes a couple of<\/div>\n<\/div>\n<\/div>\n
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courses in options income trading and<\/div>\n<\/div>\n<\/div>\n
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actually starts making some money<\/div>\n<\/div>\n<\/div>\n
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trading options that can easily happen<\/div>\n<\/div>\n<\/div>\n
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in fact when I first started trading<\/div>\n<\/div>\n<\/div>\n
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options I had this run of six months<\/div>\n<\/div>\n<\/div>\n
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right in the very beginning of my<\/div>\n<\/div>\n<\/div>\n
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trading journey where I was trading a<\/div>\n<\/div>\n<\/div>\n
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small amount of capital and crushing it<\/div>\n<\/div>\n<\/div>\n
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for six straight months before I had a<\/div>\n<\/div>\n<\/div>\n
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loss so you could get pretty cocky when<\/div>\n<\/div>\n<\/div>\n
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something like that happens so let’s say<\/div>\n<\/div>\n<\/div>\n
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our hypothetical guy is trading his<\/div>\n<\/div>\n<\/div>\n
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favorite monthly options income strategy<\/div>\n<\/div>\n<\/div>\n
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with five thousand dollars of capital<\/div>\n<\/div>\n<\/div>\n
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initially and let’s say that the trade<\/div>\n<\/div>\n<\/div>\n
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has a target profit of five hundred<\/div>\n<\/div>\n<\/div>\n
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dollars or ten percent of his capital<\/div>\n<\/div>\n<\/div>\n
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and it also has a stop a maximum loss<\/div>\n<\/div>\n<\/div>\n
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limitation of five hundred dollars for<\/div>\n<\/div>\n<\/div>\n
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every trade so the trade has a one to<\/div>\n<\/div>\n<\/div>\n
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one risk reward ratio which is actually<\/div>\n<\/div>\n<\/div>\n
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pretty good for options income trading<\/div>\n<\/div>\n<\/div>\n
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because of the very high win rate of<\/div>\n<\/div>\n<\/div>\n
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this practice now the reality is that<\/div>\n<\/div>\n<\/div>\n
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many times with this particular strategy<\/div>\n<\/div>\n<\/div>\n
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the trader will drawdown 400 dollars<\/div>\n<\/div>\n<\/div>\n
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during the course of the trade but<\/div>\n<\/div>\n<\/div>\n
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recover from that and make a profit or<\/div>\n<\/div>\n<\/div>\n
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even hit his $500 target profit let’s<\/div>\n<\/div>\n<\/div>\n
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say that that’s a common occurrence with<\/div>\n<\/div>\n<\/div>\n
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this strategy so since he’s trading a<\/div>\n<\/div>\n<\/div>\n
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$5,000 account he just sits there and<\/div>\n<\/div>\n<\/div>\n
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observes this unfold after all it’s not<\/div>\n<\/div>\n<\/div>\n
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a lot of money and he’s not too worried<\/div>\n<\/div>\n<\/div>\n
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about it because he knows that he’s back<\/div>\n<\/div>\n<\/div>\n
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tested the strategy and he’s paper<\/div>\n<\/div>\n<\/div>\n
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traded in it and he understands that<\/div>\n<\/div>\n<\/div>\n
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sometimes it’s going to draw down $400<\/div>\n<\/div>\n<\/div>\n
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before it makes a full recovery and<\/div>\n<\/div>\n<\/div>\n
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yields a great profitable result okay so<\/div>\n<\/div>\n<\/div>\n
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let’s say in this hypothetical case<\/div>\n<\/div>\n<\/div>\n
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after six months this trader is up a<\/div>\n<\/div>\n<\/div>\n
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thousand bucks on his $5,000 which is<\/div>\n<\/div>\n<\/div>\n
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very doable and options income trading<\/div>\n<\/div>\n<\/div>\n
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in certain markets so he’s up 20% on his<\/div>\n<\/div>\n<\/div>\n
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$5,000 in the worst drawdown that he<\/div>\n<\/div>\n<\/div>\n
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could have experienced during the entire<\/div>\n<\/div>\n<\/div>\n
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period was $500 so let’s take a<\/div>\n<\/div>\n<\/div>\n
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hypothetical six months so you can see<\/div>\n<\/div>\n<\/div>\n
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how he might have arrived at his $1,000<\/div>\n<\/div>\n<\/div>\n
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profit so in month one he was up he may<\/div>\n<\/div>\n<\/div>\n
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350 bucks that month and in month 2 he<\/div>\n<\/div>\n<\/div>\n
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made 500 bucks although you’ll notice he<\/div>\n<\/div>\n<\/div>\n
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drew down $400 before he ended up<\/div>\n<\/div>\n<\/div>\n
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hitting his $500 target profit in month<\/div>\n<\/div>\n<\/div>\n
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3 he got stopped out and lost 500 bucks<\/div>\n<\/div>\n<\/div>\n
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a month for he made $350 but not before<\/div>\n<\/div>\n<\/div>\n
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having drawn down $400 first during the<\/div>\n<\/div>\n<\/div>\n
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course of the trade in month 5 he lost<\/div>\n<\/div>\n<\/div>\n
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$100 and in month 6 he made 400 after<\/div>\n<\/div>\n<\/div>\n
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having initially drawn down $400 on the<\/div>\n<\/div>\n<\/div>\n
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trade so that’s how he got to his $1,000<\/div>\n<\/div>\n<\/div>\n
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profit after 6 months I want you to<\/div>\n<\/div>\n<\/div>\n
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focus on the months with the asterisks<\/div>\n<\/div>\n<\/div>\n
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you know there was three of those six<\/div>\n<\/div>\n<\/div>\n
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months so in those months he got drawn<\/div>\n<\/div>\n<\/div>\n
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down $400 at one point during the trade<\/div>\n<\/div>\n<\/div>\n
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but then ended up recovering and making<\/div>\n<\/div>\n<\/div>\n
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a nice profit and in the third month he<\/div>\n<\/div>\n<\/div>\n
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actually got stopped out at a loss of<\/div>\n<\/div>\n<\/div>\n
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$500 so now keep in mind that we’re<\/div>\n<\/div>\n<\/div>\n
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talking about modest losses of four or<\/div>\n<\/div>\n<\/div>\n
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five hundred bucks here and the guy’s<\/div>\n<\/div>\n<\/div>\n
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got $5,000 in his trading account but<\/div>\n<\/div>\n<\/div>\n
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let’s assume that he’s got much more net<\/div>\n<\/div>\n<\/div>\n
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worth than that so he’s not really<\/div>\n<\/div>\n<\/div>\n
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worried about that $400 so now this is<\/div>\n<\/div>\n<\/div>\n
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when the disaster happens and what is<\/div>\n<\/div>\n<\/div>\n
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that disaster it’s a thought that enters<\/div>\n<\/div>\n<\/div>\n
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this traders mind and he says to himself<\/div>\n<\/div>\n<\/div>\n
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well gee I made 20% on $5,000 if I had<\/div>\n<\/div>\n<\/div>\n
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traded $500,000 I’d be up a hundred<\/div>\n<\/div>\n<\/div>\n
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grand I could go out and buy that fancy<\/div>\n<\/div>\n<\/div>\n
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car and impress all my neighbors this is<\/div>\n<\/div>\n<\/div>\n
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crazy why am i trading $5,000 I mean I<\/div>\n<\/div>\n<\/div>\n
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made money for out of six months you<\/div>\n<\/div>\n<\/div>\n
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know I’m a great trader I’m up 20% just<\/div>\n<\/div>\n<\/div>\n
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six months I’m invincible I’m an ATM<\/div>\n<\/div>\n<\/div>\n
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machine as one of my ultimately<\/div>\n<\/div>\n<\/div>\n
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unsuccessful mentoring students once<\/div>\n<\/div>\n<\/div>\n
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told me so this is the moment of truth<\/div>\n<\/div>\n<\/div>\n
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or actually this is the moment of<\/div>\n<\/div>\n<\/div>\n
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falsehood this early success is<\/div>\n<\/div>\n<\/div>\n
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ironically one of the worst things that<\/div>\n<\/div>\n<\/div>\n
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it can happen to you as a trader as<\/div>\n<\/div>\n<\/div>\n
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you’re about to understand now before we<\/div>\n<\/div>\n<\/div>\n
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go any further before we explain exactly<\/div>\n<\/div>\n<\/div>\n
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why a disaster is about to take place I<\/div>\n<\/div>\n<\/div>\n
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did want to point out that while this is<\/div>\n<\/div>\n<\/div>\n
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a cautionary video intended to make your<\/div>\n<\/div>\n<\/div>\n
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expectations realistic about what’s in<\/div>\n<\/div>\n<\/div>\n
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front of you as a developing trader I<\/div>\n<\/div>\n<\/div>\n
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also would want you to know that we are<\/div>\n<\/div>\n<\/div>\n
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currently running a two-hour free<\/div>\n<\/div>\n<\/div>\n
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intensive workshop at the moment<\/div>\n<\/div>\n<\/div>\n
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where will be teaching you three<\/div>\n<\/div>\n<\/div>\n
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real-world option strategies that actual<\/div>\n<\/div>\n<\/div>\n
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professional options traders use<\/div>\n<\/div>\n<\/div>\n
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including a really simple but incredibly<\/div>\n<\/div>\n<\/div>\n
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effective strategy that some of the<\/div>\n<\/div>\n<\/div>\n
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greatest investors in the world like<\/div>\n<\/div>\n<\/div>\n
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Warren Buffett used all the time plus an<\/div>\n<\/div>\n<\/div>\n
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options trading strategy that has a<\/div>\n<\/div>\n<\/div>\n
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statistical 80 percent probability of<\/div>\n<\/div>\n<\/div>\n
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profit month in and month out plus an<\/div>\n<\/div>\n<\/div>\n
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option strategy that you can employ with<\/div>\n<\/div>\n<\/div>\n
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the stock that you like where you’ll<\/div>\n<\/div>\n<\/div>\n
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make your target profit whether the<\/div>\n<\/div>\n<\/div>\n
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stock goes up goes nowhere or even goes<\/div>\n<\/div>\n<\/div>\n
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down a small percentage so if those<\/div>\n<\/div>\n<\/div>\n
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strategies would be of interest to you<\/div>\n<\/div>\n<\/div>\n
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then you should check out the free<\/div>\n<\/div>\n<\/div>\n
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options class that we’re currently<\/div>\n<\/div>\n<\/div>\n
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running just go ahead and click the link<\/div>\n<\/div>\n<\/div>\n
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that should be appearing now at the top<\/div>\n<\/div>\n<\/div>\n
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right corner of your screen that will<\/div>\n<\/div>\n<\/div>\n
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open up the free registration page in a<\/div>\n<\/div>\n<\/div>\n
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new window so don’t worry you won’t lose<\/div>\n<\/div>\n<\/div>\n
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this video or you can just head on over<\/div>\n<\/div>\n<\/div>\n
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to options class com to register for<\/div>\n<\/div>\n<\/div>\n
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this free intensive workshop it’s a rare<\/div>\n<\/div>\n<\/div>\n
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opportunity for retail traders and<\/div>\n<\/div>\n<\/div>\n
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investors to learn directly from Wall<\/div>\n<\/div>\n<\/div>\n
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Street traders but that’s exactly what<\/div>\n<\/div>\n<\/div>\n
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you’ll be getting through this free<\/div>\n<\/div>\n<\/div>\n
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online workshop so click the link to<\/div>\n<\/div>\n<\/div>\n
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\n
sign up now and don’t miss it ok so now<\/div>\n<\/div>\n<\/div>\n
\n
\n
back to our trading example let’s just<\/div>\n<\/div>\n<\/div>\n
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say hypothetically the next month he<\/div>\n<\/div>\n<\/div>\n
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pours<\/div>\n<\/div>\n<\/div>\n
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foolishly five hundred thousand dollars<\/div>\n<\/div>\n<\/div>\n
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into his account and I’m telling you<\/div>\n<\/div>\n<\/div>\n
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I’ve seen this happen repeatedly to<\/div>\n<\/div>\n<\/div>\n
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traders who are first getting started so<\/div>\n<\/div>\n<\/div>\n
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he pours 1\/2 million dollars into his<\/div>\n<\/div>\n<\/div>\n
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account and he starts trading the same<\/div>\n<\/div>\n<\/div>\n
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strategy with the same properties the<\/div>\n<\/div>\n<\/div>\n
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same likelihoods everything’s the same<\/div>\n<\/div>\n<\/div>\n
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except he’s now making a five hundred<\/div>\n<\/div>\n<\/div>\n
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thousand dollar trade as opposed to a<\/div>\n<\/div>\n<\/div>\n
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five thousand dollar trade so we’ve seen<\/div>\n<\/div>\n<\/div>\n
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that the trade in three of the first six<\/div>\n<\/div>\n<\/div>\n
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cases drew down four hundred dollars at<\/div>\n<\/div>\n<\/div>\n
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one point well when you’re trading a<\/div>\n<\/div>\n<\/div>\n
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$500,000 account then everything is a<\/div>\n<\/div>\n<\/div>\n
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hundred times larger than a five<\/div>\n<\/div>\n<\/div>\n
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thousand dollar account so a mid trade<\/div>\n<\/div>\n<\/div>\n
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drawdown of four hundred dollars before<\/div>\n<\/div>\n<\/div>\n
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becomes a mid trade drawdown of $40,000<\/div>\n<\/div>\n<\/div>\n
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with the new size well he’s not used to<\/div>\n<\/div>\n<\/div>\n
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seeing his account drawdown $40,000 the<\/div>\n<\/div>\n<\/div>\n
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biggest drawdown he saw before was five<\/div>\n<\/div>\n<\/div>\n
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hundred dollars in the month he got<\/div>\n<\/div>\n<\/div>\n
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stopped so what would have been chump<\/div>\n<\/div>\n<\/div>\n
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change to him on a five thousand dollar<\/div>\n<\/div>\n<\/div>\n
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account at the exact same level of<\/div>\n<\/div>\n<\/div>\n
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drawdown in other words what would have<\/div>\n<\/div>\n<\/div>\n
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been a<\/div>\n<\/div>\n<\/div>\n
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$400 loss at his original Capitol level<\/div>\n<\/div>\n<\/div>\n
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now produces a $40,000 drawdown meaning<\/div>\n<\/div>\n<\/div>\n
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he’s down 40,000 bucks but he’s not been<\/div>\n<\/div>\n<\/div>\n
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stopped as yet because his stop is now<\/div>\n<\/div>\n<\/div>\n
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50,000 so what happens I’ll tell you<\/div>\n<\/div>\n<\/div>\n
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what happens he hits the panic button<\/div>\n<\/div>\n<\/div>\n
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and his mind fills with doubt and fear<\/div>\n<\/div>\n<\/div>\n
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and he’s kicking himself he can’t<\/div>\n<\/div>\n<\/div>\n
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believe he got himself into this<\/div>\n<\/div>\n<\/div>\n
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situation and he closes the trade with a<\/div>\n<\/div>\n<\/div>\n
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$40,000 loss to relieve his anxiety and<\/div>\n<\/div>\n<\/div>\n
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fear well I want you to think about that<\/div>\n<\/div>\n<\/div>\n
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slide that I showed you before the first<\/div>\n<\/div>\n<\/div>\n
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six months of this traders journey where<\/div>\n<\/div>\n<\/div>\n
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he made money four out of six months and<\/div>\n<\/div>\n<\/div>\n
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produced a 20% return well look what<\/div>\n<\/div>\n<\/div>\n
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happens when he freaks out and panics<\/div>\n<\/div>\n<\/div>\n
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out of the trades because he’s trading<\/div>\n<\/div>\n<\/div>\n
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way too large for his experience level<\/div>\n<\/div>\n<\/div>\n
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and his current risk tolerance he ends<\/div>\n<\/div>\n<\/div>\n
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up losing 27 percent and losing $135,000<\/div>\n<\/div>\n<\/div>\n
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where if he had traded exactly the way<\/div>\n<\/div>\n<\/div>\n
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he was trading before with the $5,000<\/div>\n<\/div>\n<\/div>\n
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account there’s a very good likelihood<\/div>\n<\/div>\n<\/div>\n
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that had he not panicked out at the<\/div>\n<\/div>\n<\/div>\n
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$40,000 level on each trade which had<\/div>\n<\/div>\n<\/div>\n
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formerly drawn down only $400 had he<\/div>\n<\/div>\n<\/div>\n
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just maintained his former discipline<\/div>\n<\/div>\n<\/div>\n
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there’s a very good chance that he would<\/div>\n<\/div>\n<\/div>\n
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have recovered from those losses and<\/div>\n<\/div>\n<\/div>\n
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there’s no reason to believe at all that<\/div>\n<\/div>\n<\/div>\n
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he couldn’t have made the hundred<\/div>\n<\/div>\n<\/div>\n
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thousand dollars and the twenty percent<\/div>\n<\/div>\n<\/div>\n
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positive return that he made in his<\/div>\n<\/div>\n<\/div>\n
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first six months on the lower capital<\/div>\n<\/div>\n<\/div>\n
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level instead he ended up losing on five<\/div>\n<\/div>\n<\/div>\n
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out of six trades and panicking out of<\/div>\n<\/div>\n<\/div>\n
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each trade at a forty thousand dollar<\/div>\n<\/div>\n<\/div>\n
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loss as you can see ending up with a<\/div>\n<\/div>\n<\/div>\n
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disastrous outcome because of the shear<\/div>\n<\/div>\n<\/div>\n
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dollar amount of the drawdown the fact<\/div>\n<\/div>\n<\/div>\n
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is that he was not ready to trade that<\/div>\n<\/div>\n<\/div>\n
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sighs it was a wonderful idea<\/div>\n<\/div>\n<\/div>\n
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I’ll even admit it was a logical idea<\/div>\n<\/div>\n<\/div>\n
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unfortunately it was impossible to<\/div>\n<\/div>\n<\/div>\n
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implement in the real world where the<\/div>\n<\/div>\n<\/div>\n
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rest of us live it was impossible to<\/div>\n<\/div>\n<\/div>\n
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translate into reality because of the<\/div>\n<\/div>\n<\/div>\n
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psychological barrier of jumping from a<\/div>\n<\/div>\n<\/div>\n
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drawdown of four hundred dollars and<\/div>\n<\/div>\n<\/div>\n
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translating that into a drawdown of<\/div>\n<\/div>\n<\/div>\n
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thirty to forty thousand dollars in the<\/div>\n<\/div>\n<\/div>\n
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\n
exact same trading situation just on a<\/div>\n<\/div>\n<\/div>\n
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greater level of capital now you may<\/div>\n<\/div>\n<\/div>\n
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think that you’re a robot with nerves of<\/div>\n<\/div>\n<\/div>\n
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steel and this wouldn’t happen to you<\/div>\n<\/div>\n<\/div>\n
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but I can assure you I’ve been trading<\/div>\n<\/div>\n<\/div>\n
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options for<\/div>\n<\/div>\n<\/div>\n
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long time I have never met anyone who<\/div>\n<\/div>\n<\/div>\n
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hasn’t failed miserably in this exact<\/div>\n<\/div>\n<\/div>\n
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scenario that person doesn’t exist so<\/div>\n<\/div>\n<\/div>\n
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\n
how can we avoid this trap first of all<\/div>\n<\/div>\n<\/div>\n
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\n
I want to say unequivocally that this<\/div>\n<\/div>\n<\/div>\n
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trap can be avoided and you can get to<\/div>\n<\/div>\n<\/div>\n
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\n
the point where you will be trading<\/div>\n<\/div>\n<\/div>\n
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exactly the same as you were trading on<\/div>\n<\/div>\n<\/div>\n
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the smart capital level you just need to<\/div>\n<\/div>\n<\/div>\n
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know how to get there<\/div>\n<\/div>\n<\/div>\n
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we’ve got traders on our desk here at<\/div>\n<\/div>\n<\/div>\n
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\n
SMB who regularly draw down 75 to<\/div>\n<\/div>\n<\/div>\n
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\n
$100,000 intraday and make millions of<\/div>\n<\/div>\n<\/div>\n
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\n
dollars a year trading for the firm so<\/div>\n<\/div>\n<\/div>\n
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\n
you don’t have to fall into this trap so<\/div>\n<\/div>\n<\/div>\n
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\n
the way to avoid this problem is by<\/div>\n<\/div>\n<\/div>\n
\n
\n
understanding that sizing up your<\/div>\n<\/div>\n<\/div>\n
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trading account is exactly like weight<\/div>\n<\/div>\n<\/div>\n
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\n
training one of the guys on our desk has<\/div>\n<\/div>\n<\/div>\n
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\n
actually done extensive weight training<\/div>\n<\/div>\n<\/div>\n
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\n
and he told me that you typically start<\/div>\n<\/div>\n<\/div>\n
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out lifting about say 50 pounds and if<\/div>\n<\/div>\n<\/div>\n
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you can do that consistently for a<\/div>\n<\/div>\n<\/div>\n
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\n
little while you bump your weight five<\/div>\n<\/div>\n<\/div>\n
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pounds at a time<\/div>\n<\/div>\n<\/div>\n
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\n
five pounds that’s a 10% increase and<\/div>\n<\/div>\n<\/div>\n
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\n
when you get to a hundred fifty-pound<\/div>\n<\/div>\n<\/div>\n
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\n
that’s a three percent increase we’re<\/div>\n<\/div>\n<\/div>\n
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talking about minor incremental<\/div>\n<\/div>\n<\/div>\n
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increases so you don’t injure yourself<\/div>\n<\/div>\n<\/div>\n
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this guy on our desk was able to build<\/div>\n<\/div>\n<\/div>\n
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up to five hundred pounds that’s a 1000%<\/div>\n<\/div>\n<\/div>\n
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increase but he did so very very<\/div>\n<\/div>\n<\/div>\n
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\n
gradually over a number of years so your<\/div>\n<\/div>\n<\/div>\n
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\n
start at a much lower level 50 pounds or<\/div>\n<\/div>\n<\/div>\n
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so and it’s not going to take you three<\/div>\n<\/div>\n<\/div>\n
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\n
days it’s going to take a number of<\/div>\n<\/div>\n<\/div>\n
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\n
years to get to 500 pounds and a lot of<\/div>\n<\/div>\n<\/div>\n
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discipline and study and skill risk<\/div>\n<\/div>\n<\/div>\n
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\n
tolerance and muscle building have a lot<\/div>\n<\/div>\n<\/div>\n
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of similarities you’re not going to be<\/div>\n<\/div>\n<\/div>\n
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able to go from being able to tolerate a<\/div>\n<\/div>\n<\/div>\n
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\n
drawdown of $400 to being able to<\/div>\n<\/div>\n<\/div>\n
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tolerate a drawdown of $40,000 overnight<\/div>\n<\/div>\n<\/div>\n
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you can get to the level where a 40,000<\/div>\n<\/div>\n<\/div>\n
\n
\n
drawdown actually is no problem for you<\/div>\n<\/div>\n<\/div>\n
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you B may even get to the point where<\/div>\n<\/div>\n<\/div>\n
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\n
you’re trading for prop firm like ours<\/div>\n<\/div>\n<\/div>\n
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trading a twenty million dollar account<\/div>\n<\/div>\n<\/div>\n
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\n
at those levels you can easily get to a<\/div>\n<\/div>\n<\/div>\n
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\n
point where that level would drawdown a<\/div>\n<\/div>\n<\/div>\n
\n
\n
forty thousand drawdown is not something<\/div>\n<\/div>\n<\/div>\n
\n
\n
that even bothers you psychologically<\/div>\n<\/div>\n<\/div>\n
\n
\n
but you’re not going to get there if<\/div>\n<\/div>\n<\/div>\n
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\n
your account is five thousand dollars<\/div>\n<\/div>\n<\/div>\n
\n
\n
and you bump it to five hundred thousand<\/div>\n<\/div>\n<\/div>\n
\n
\n
dollars without any interim steps at all<\/div>\n<\/div>\n<\/div>\n
\n
\n
either if you increase your capital very<\/div>\n<\/div>\n<\/div>\n
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\n
very slowly over time you can build up<\/div>\n<\/div>\n<\/div>\n
\n
\n
that risk tolerance muscle and then that<\/div>\n<\/div>\n<\/div>\n
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\n
statement that you could have made<\/div>\n<\/div>\n<\/div>\n
\n
\n
$100,000 in six months can actually<\/div>\n<\/div>\n<\/div>\n
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\n
become legitimately true and happens the<\/div>\n<\/div>\n<\/div>\n
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\n
guys around here all the time you are<\/div>\n<\/div>\n<\/div>\n
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\n
not going to get there all at once<\/div>\n<\/div>\n<\/div>\n
\n
\n
everything about trading is a gradual<\/div>\n<\/div>\n<\/div>\n
\n
\n
skill building process and in this case<\/div>\n<\/div>\n<\/div>\n
\n
\n
it’s a gradual psychological risk<\/div>\n<\/div>\n<\/div>\n
\n
\n
tolerance building process that takes<\/div>\n<\/div>\n<\/div>\n
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\n
time if you try to rush it I assure you<\/div>\n<\/div>\n<\/div>\n
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\n
you’ll regret it I am so positive that<\/div>\n<\/div>\n<\/div>\n
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\n
you will regret it if you fall into this<\/div>\n<\/div>\n<\/div>\n
\n
\n
trap that I’ve made this options trading<\/div>\n<\/div>\n<\/div>\n
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\n
blunder number one because I think it’s<\/div>\n<\/div>\n<\/div>\n
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\n
actually the most dangerous and<\/div>\n<\/div>\n<\/div>\n
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\n
devastating mistake that people can make<\/div>\n<\/div>\n<\/div>\n
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\n
and the reason it’s so devastating is<\/div>\n<\/div>\n<\/div>\n
\n
\n
that some people never psychologically<\/div>\n<\/div>\n<\/div>\n
\n
\n
recover from a series of losses like we<\/div>\n<\/div>\n<\/div>\n
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\n
just showed you or just about as bad<\/div>\n<\/div>\n<\/div>\n
\n
\n
they do recover from it but the<\/div>\n<\/div>\n<\/div>\n
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\n
psychological scars that it creates<\/div>\n<\/div>\n<\/div>\n
\n
\n
because they ramped up their capital<\/div>\n<\/div>\n<\/div>\n
\n
\n
level too quickly in the beginning<\/div>\n<\/div>\n<\/div>\n
\n
\n
affect their trading so deeply they<\/div>\n<\/div>\n<\/div>\n
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\n
never really shake the fear created by<\/div>\n<\/div>\n<\/div>\n
\n
\n
those situations that they weren’t ready<\/div>\n<\/div>\n<\/div>\n
\n
\n
for and they permanently trade scared<\/div>\n<\/div>\n<\/div>\n
\n
\n
which does not work if a trader is to<\/div>\n<\/div>\n<\/div>\n
\n
\n
gun shy to take risky will never be<\/div>\n<\/div>\n<\/div>\n
\n
\n
successful whereas if you had build up<\/div>\n<\/div>\n<\/div>\n
\n
\n
your capital level gradually if you had<\/div>\n<\/div>\n<\/div>\n
\n
\n
done it intelligently then you would not<\/div>\n<\/div>\n<\/div>\n
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\n
be scarred psychologically by a<\/div>\n<\/div>\n<\/div>\n
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\n
particular experience instead you would<\/div>\n<\/div>\n<\/div>\n
\n
\n
slowly and gradually get more and more<\/div>\n<\/div>\n<\/div>\n
\n
\n
comfortable and you’ll come to expect<\/div>\n<\/div>\n<\/div>\n
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\n
that you will encounter temporary draw<\/div>\n<\/div>\n<\/div>\n
\n
\n
downs of a larger magnitude and you take<\/div>\n<\/div>\n<\/div>\n
\n
\n
them in stride instead of freaking out<\/div>\n<\/div>\n<\/div>\n
\n
\n
instead you’d make money in months where<\/div>\n<\/div>\n<\/div>\n
\n
\n
you drew down initially in many cases<\/div>\n<\/div>\n<\/div>\n
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and in the few cases where you got<\/div>\n<\/div>\n<\/div>\n
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stopped out you take that loss and try<\/div>\n<\/div>\n<\/div>\n
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to move on to the next month and in many<\/div>\n<\/div>\n<\/div>\n
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cases make the money back in short order<\/div>\n<\/div>\n<\/div>\n
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and proceed to experience the strong<\/div>\n<\/div>\n<\/div>\n
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returns that you expected so<\/div>\n<\/div>\n<\/div>\n
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understanding options trading blunt<\/div>\n<\/div>\n<\/div>\n
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blunder number one to repeat I’ll trade<\/div>\n<\/div>\n<\/div>\n
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five hundred thousand dollars of capital<\/div>\n<\/div>\n<\/div>\n
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the same as I currently trade five<\/div>\n<\/div>\n<\/div>\n
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thousand dollars is a crucial principle<\/div>\n<\/div>\n<\/div>\n
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for you to understand for your long-term<\/div>\n<\/div>\n<\/div>\n
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success as a trader if any of this is<\/div>\n<\/div>\n<\/div>\n
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familiar and you<\/div>\n<\/div>\n<\/div>\n
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just ramped up your account and you’re<\/div>\n<\/div>\n<\/div>\n
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feeling cocky about your trading please<\/div>\n<\/div>\n<\/div>\n
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stop everything and get in contact with<\/div>\n<\/div>\n<\/div>\n
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me if this video hasn’t succeeded in<\/div>\n<\/div>\n<\/div>\n
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talking you out of it I’ll personally<\/div>\n<\/div>\n<\/div>\n
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talk you out of it as a public service<\/div>\n<\/div>\n<\/div>\n
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because it’s that critical you’re never<\/div>\n<\/div>\n<\/div>\n
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going to be a successful trader if you<\/div>\n<\/div>\n<\/div>\n
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start out knocking yourself out of the<\/div>\n<\/div>\n<\/div>\n
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game psychologically in your early days<\/div>\n<\/div>\n<\/div>\n
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as a trader and that would be a shame<\/div>\n<\/div>\n<\/div>\n
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because this style of trading has such a<\/div>\n<\/div>\n<\/div>\n
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high winrate that if you just build up<\/div>\n<\/div>\n<\/div>\n
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your capital level gradually you have a<\/div>\n<\/div>\n<\/div>\n
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really good shot at reaping the rewards<\/div>\n<\/div>\n<\/div>\n
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you were seeking in the first place now<\/div>\n<\/div>\n<\/div>\n
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just to remind you as I said earlier if<\/div>\n<\/div>\n<\/div>\n
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you enjoyed this video and learn<\/div>\n<\/div>\n<\/div>\n
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something valuable from it and would<\/div>\n<\/div>\n<\/div>\n
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like to learn the details of three<\/div>\n<\/div>\n<\/div>\n
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real-world option strategies that<\/div>\n<\/div>\n<\/div>\n
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professional options traders use all the<\/div>\n<\/div>\n<\/div>\n
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time<\/div>\n<\/div>\n<\/div>\n
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then you should check out the free<\/div>\n<\/div>\n<\/div>\n
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options class that we’re currently<\/div>\n<\/div>\n<\/div>\n
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running just go ahead and click the link<\/div>\n<\/div>\n<\/div>\n
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it should be appearing now at the top<\/div>\n<\/div>\n<\/div>\n
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right hand corner of your screen that<\/div>\n<\/div>\n<\/div>\n
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will open up the free registration page<\/div>\n<\/div>\n<\/div>\n
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in a new window so you won’t lose this<\/div>\n<\/div>\n<\/div>\n
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video don’t worry or you can just head<\/div>\n<\/div>\n<\/div>\n
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on over to options class com to register<\/div>\n<\/div>\n<\/div>\n
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for this free intensive workshop it’s<\/div>\n<\/div>\n<\/div>\n
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really a rare opportunity for retail<\/div>\n<\/div>\n<\/div>\n
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traders and investors to learn directly<\/div>\n<\/div>\n<\/div>\n
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from Wall Street traders but that’s<\/div>\n<\/div>\n<\/div>\n
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\n
exactly what you’ll be getting through<\/div>\n<\/div>\n<\/div>\n
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this free online workshop so click the<\/div>\n<\/div>\n<\/div>\n
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link to sign up now and don’t miss it<\/div>\n<\/div>\n<\/div>\n
\n
\n
okay so now it’s your turn does any of<\/div>\n<\/div>\n<\/div>\n
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this sound familiar to you does any one<\/div>\n<\/div>\n<\/div>\n
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of our subscribers or viewers have a<\/div>\n<\/div>\n<\/div>\n
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similar story if you do please comment<\/div>\n<\/div>\n<\/div>\n
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below so that the others can all see<\/div>\n<\/div>\n<\/div>\n
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that what I’m talking about is the real<\/div>\n<\/div>\n<\/div>\n
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deal and something extremely important<\/div>\n<\/div>\n<\/div>\n
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that must be kept in mind and please<\/div>\n<\/div>\n<\/div>\n
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right now press on this subscribe button<\/div>\n<\/div>\n<\/div>\n
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because you’ll be notified as we<\/div>\n<\/div>\n<\/div>\n
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continue this important series that you<\/div>\n<\/div>\n<\/div>\n
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will keep you focused on all of the<\/div>\n<\/div>\n<\/div>\n
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important pitfalls that you need to<\/div>\n<\/div>\n<\/div>\n
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avoid to become a successful<\/div>\n<\/div>\n<\/div>\n
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professional full-time options trader<\/div>\n<\/div>\n<\/div>\n
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which for many of you is your dream<\/div>\n<\/div>\n<\/div>\n
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<\/div><\/div>\n<\/div>\n<\/div>\n

\"\"<\/a><\/p>\n

* no relevant positions<\/p>\n","protected":false},"excerpt":{"rendered":"

This video is the first of a series of ten videos that we’ll be producing as cautionary warnings about the largest mistakes that options traders make and how they can rectify those mistakes. The first Options blunder we’ll cover in this video is about the disastrous consequences of getting cocky and sizing up too quickly as an options income trader. … Read More<\/a><\/p>\n","protected":false},"author":290,"featured_media":49523,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[4189],"tags":[],"class_list":["post-49522","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-free-daily-trading-video","post_format-post-format-video"],"yoast_head":"\nOur Huge Options Trading Blunders Series: Episode 1 | SMB Training<\/title>\n<meta name=\"description\" content=\"Learn from our options trading mistakes and avoid common pitfalls. 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