Jan 15. Down 500.

Years ago I resisted the Dot Com stock boom. I knew that stocks were being valued in crazy ways, I knew it had no fundamental basis. Eventually, I joined the party and played the game. I lost a whole lot of money and suffered an extended medical depression. The mental anguish was absolutely terrible. At one point, a person who was helping me through it all told me that he thought I would trade again. It took me a long time to get back in the waters, but I did – with a horrifically painful lesson learned.

That lesson? :: Markets can move farther and faster than you ever dreamed.

Ever since then I’ve kept this lesson first and foremost in mind and traded accordingly. Because of that, I entered 2016 and this Bear Market with about 50% of my accounts in cash, and a definite plan to use this opportunity to put all of my cash to work. I am executing that plan and truly am not worried about the market at all. I am achieving my daily goals with ease because they were planned during a quiet market. I have no need to be reacting to market moves like today’s 500 point drop. I’m using this market to slowly put that cash to work by selling puts and allowing some positions to be exercised. Other positions that can generate enough income get rolled forward, placing new cash in the accounts.

Every year, my account goes through a significant drawdown at some point. That’s OK because every day I am taking advantage of the time decay of short options, and also adding new cash to the account at a planned level of 0.001% a day.

Trading for income is different than investing. As an income trader, it is all about cash flow for me. If the symbols in my account lose 30% in an awful year and move between $150k down to $100k I lose $50,000. But not if I am using options to throw off $150 in new cash every trading day. That’s $40,000 in new cash, so my underlying positions can fall by 30% and my account would only fall by $10,000. It would still be earning $150 a day in new cash flow. Using options for income, Cash Is King.

Stay Optioned, my friend!

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