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During the “golden era” of the stock market in
the 90’s, my mainly buy and hold strategy worked beautifully. All I needed
was buying blue chip & well known dot-com stocks and held them. After
a while, more than 50% of my holdings would yield profit. I was high
flying in those golden years and naively believed the stock market has
only one way to move: up. However, the crash in the year of 2000 ended my
“honey moon” with the stock market. I realized I needed a change in my
trading method.
In the subsequent years after the market crash
at the turn of this century, I knew I needed to change my trading style.
The old style did not work well at all in new market environment. The
opportunity knocked on my door in February of 2005 when I was invited to
attend a seminar in Pasadena
and was introduced to the Investools method.
I was excited to learn from Investools a new way
to trade stock. I learned how to pick stocks and did not rely on blue
chip stocks any more in my trading. I was, however, still a one-dimension
stock trader at that time. I could only made money in an up market. By
then, I learned the stock market does not move in one direction. It moves
in all three directions: up, down and sideway. Since I was purely a stock
trader, I could only make money in an up market. My gain was usually
wiped out when my stock was down and I could only watch helplessly when
it went sideway. That was a frustrated situation. I knew I needed to
change my trading style again.
I heard about option trading when I started my
trading in the 90’s but I did not pay attention to it. I didn’t have to.
Since it was so easy to make money trading stock, why bother with option
trading? Now, I realize I may need to look at option trading for a
change. When Investools introduced option trading to me in 2005, I saw a
brand new trading opportunity. I decided to change myself from a stock
trader to an option trader.
I was told option trading is risky. It is true
if we don’t understand option trading thoroughly. If we take time to
study option well, it is a beautiful tool to trade the market profitably.
It helps us to take advantage of all three market conditions and also
provides “insurance” for our stock portfolio in case the market drops.
Option gives us more leverage in trading; hence, less capital is needed.
However, option leverage is like a two-side sword. It can help us to cut
through an object easily but it can also hurt ourselves as easily.
When I was still a stock trader, a down day was
surely a losing day for me. Now, I am an option trader, opportunities are
always there for me on any given day regardless of the market condition.
It takes time, experience, patience and skill to find those opportunities
and make the most of them. Risk is always there. The key here is using
option trading to minimize those risks. Option trading gives us a chance
to switch from bullish position to bearish one and vice versa. Option
provides more than one way to trade in a given position. That is why I
believe option trading is so fun and exciting. If we find an option
strategy that works well with our trading style and philosophy, it is
even more fun to trade it.
To change or not to change? The choice is mine
and I choose to change to adapt myself to this rapidly changing world. To
me, it is impractical to expect different result tomorrow but doing the
same thing today.
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