In Defense of the Option Trader

by

Brad Castro

The speculative option trader is often maligned as short-sighted, unrealistic, and greedy. Speculative option trading is ridiculed as a lottery mindset. It's judged as reckless and way too risky. It's for those who want to get rich quick, and as every true investor knows, so the assumption goes, getting rich quick just doesn't happen.

No doubt, there's a lot of truth to these biases, but biases they still are. Yes, foolish people with money can piss away the contents of their brokerage account in short order by trading stock options too aggressively. But the fact is, certain people are constitutionally very well-suited for aggressive option trading strategies.

I just don't happen to be one of them.

An Unusual Example

My friend was totally gung-ho in everything he did, an ex-marine with the most aggressive sense of wonder I have ever encountered in another human being. His approach to one-on-one video game combat--we were shooting at each rather than at monstrous, alien enemies--was no different.

The game was open-ended. Every time a player's character was killed, he would regenerate randomly in some other part of the level. We probably played for thirty or forty-five minutes and my friend's technique was consistent and successful.

He simply charged me all game long, hunting me down and then sprinting his character at mine as fast as he could, heavy weapons blazing, and then mauling me in vicious hand-to-hand combat if I were still alive when he reached me.

What was important was to be bold and act.

My own philosophy was more deliberate and cerebral. And largely ineffective in a tactical combat situation.

Still, I recall with fondness the two or three occasions where I managed to hole myself in a shadowy corner or an elevated sniper's position, waited for him to run past, and then blasted the hell out of him when his back was turned, laughing in pure unadulterated joy as I listened to him cursing my cowardice.

So What Does This Have To Do With Options?

Yes, the rookie option trader can make a lot of dumb, predictable, and frighteningly costly mistakes trading stock options. But just as there are professional gamblers who make real careers and incomes from playing games of supposed chance, trading stock options speculatively, for the right personality, is not only a viable choice, but the only choice.

As in the story above, the successful options speculator, by his very nature, will favor the tactical over the strategic. You can be drawn to both, of course, but for the speculator, in Jungian terms, it's the Warrior archetype he embodies, not the King archetype. Frequently, many warriors grow into kings, but this is always an issue of individual personality, not maturity.

There are two types of kings--those who lead their troops into battle and those who send their troops into battle. Traders, I contend, lead their troops into battle.

I, on the other hand, as a Leveraged Investor, prefer to send my troops into battle.