Why Your Stocks Need The Safety of Options | OptionsANIMAL
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Buckle-Up! Why Your Stocks Need The Safety of Options

When I tell people that I trade options, I often get the same response: options are risky. Frankly, options are the opposite of risky – when they are used properly – they give traders the ability to limit risk and also increase their odds of winning. You wouldn’t drive your car without a seat-belt, why trade stocks without options? I’m going to show you how trading options can be more safe than just trading stocks.

Trading Stocks is Risky – Trading Options is Not

When you buy a stock, you have the potential to lose the entire investment. That assumes, of course, that the stock goes to zero – bankrupt. You don’t have to look back too far to see examples of that. Recall the financial crisis of 2007 and 2008. Lehman Brothers, Washington Mutual, and Countrywide once considered solid companies no longer exist. Don’t forget others like Chrysler and General Motors. Or Borders, Circuit City, Sharper Image, and Tweeter. They all went bankrupt.

And, it’s going on today. Pacific Sunwear (PSUN) recently and Alpha Natural Resources (formerly ANR now ANRZQ) recently filed for bankruptcy. Serval other companies are on the brink.

And here’s a few other companies which haven’t gone bankrupt (yet) but they have had epic falls in the past year:

1-Year HighRecent Low
Valeant (VRX)$263.81$25.20
Peabody Energy (BTU)$84.00$2.00
LinkedIn (LNKD)$266.53$98.25
Chesapeake Energy (CHK)$16.98$1.50
Sears Holding (SHLD)$44.72$14.05
GoPro (GPRO)$65.49$9.01

I can recall hearing so called “experts” espousing each of those equities as good investments not too long ago. Think: Bill Ackman and Valeant.

The fact is that most people who pick stocks are wrong

That also includes the so-called “experts.” Take a browse of CXOAdvisory.com’s Guru List. There, you will find the performance record of many very well-known stock pickers. Most of the people on this list – two-thirds of them in fact– could not beat the flip of a coin when picking a stock. You would be better off doing the opposite of what most of them say.

In my experience, a lot of those people are not any smarter than you. The qualifications that give them the opportunity to provide recommendations in the media has more to do with how entertaining they are, rather than their track-record.

Low Beta is Not Low Risk

A personal pet-peeve of mine is beta. Nearly every week, you hear those experts telling you to pick “low beta stocks” to avoid risk. That is complete B.S. Consider the beta of those stocks mentioned above.

Beta
Valeant (VRX)0.24
Peabody Energy (BTU)0.93
LinkedIn (LNKD)1.61
Chesapeake Energy (CHK)1.77
Sears Holding (SHLD)2.23
GoPro (GPRO)0.66

Some of those qualify as “low beta” stocks. But, they are certainly not low risk!

If you think low beta means low risk, you don’t understand beta. And if someone advises you to trade “low beta” stocks, they probably are not qualified to give you advice. You can read more about beta here: Beta, Volatility, and Risk – What you need to know about Beta

Even if you do understand beta, it’s still hard to pick stocks.

Almost is Good Enough… for Options Traders

Educated and experienced option traders understand that with options, you can build trades to speculate, protect assets, or generate and income – or a combination of those.

A common example is the covered call. This involves buying the stock and selling a call. A long call is essentially a guarantee that the option buyer can buy the stock at an agreed price. The call seller is obliged to sell the stock at that price, if the option buyer exercises their right to buy.

Consider this example. Tesla (TSLA) is trading for $250.00 per share. A stock trader could buy that stock and has about a 50%/50% of making a profit. A covered call trader could buy the stock and also sell the June expiration call at the $250 strike for $19.35. The cost basis for that covered call trade is $230.65. (In options trading we trade in lots of 100 shares. The cost for the stock trade is $25,000 and the covered call is $23,065.) To make money on the stock trade, TSLA needs to be above $250. For the covered call, it’s got to be above $230.65. Which has more likelihood of making money? The covered call. The stock can fall by nearly $20 and the covered call can still be profitable. The probability of the covered call being profitable is about 57%.

Just like horseshoes and hand-grenades, almost is good enough for some options trades.

Trading Options Can Dramatically Lower Your Risk

What about the risk? The covered call risk is $230.65 and the stock trade risk is $250.00. Stock is slightly riskier.

What’s the drawback of the covered call over long stock? It is that the profit of long stock is theoretically unlimited, while the covered call trader is obliged to sell at $250 if the long call owner exercises the option. The maximum profit on the covered call is $19.35.

Is that good? That’s 8.4% in just 67 days or less. On an annualized basis that is 47%. I think that’s pretty good.

But what about the downside? TSLA has earnings on May 4. And TSLA has been known to have a massive pop or drop on earnings.

The options trader could decide to control their risk even more by buying a long put. The long put gives the owner the right to sell their stock at the specified strike price. Think of it as an insurance policy for your stock.

The combination of long stock, a short call, and a long put is a collar trade.

Let’s take a quick look at a collar trade on TSLA. If the covered call trader added the May $235 long put for $12.40, that would bring the cost basis of the trade to $243.05, where the maximum loss would be $8.05 and the maximum profit would be $6.95. The maximum return on risk is 116%. In actual dollars that would mean that while you invested $24,305 in the trade, you are only risking $805.

This is a simple example of how a trader could increase the probability of profit and also reduce risk.

But It Can Be Risky – If You Don’t Know What You’re Doing

I draw a parallel to driving a car. You are moving two tons of steel and glass, where explosions of flammable liquid propel you at speeds faster than a cheetah. We pass within just a few feet of concrete abutments; other vehicles; and even pedestrians. The consequences of a few simple mistakes could be catastrophic, yet we are all very comfortable driving cars. This is because we have rules, wear our seat belts, and were all trained how to operate a car safely. It is the same as options trading.

I recall a recent story in a financial publication about the dangers of options trading for retail traders. One example they cite is of a retiree who placed a covered call and had a huge loss. It wasn’t a covered call that caused the loss. In fact, the covered call lost less than if he had just had stock alone. And, if he had a collar trade in place, it would not have been news because his loss would have been far less significant! The story here is that the guy didn’t know how to use options. And no one seems to take notice when a stock trader takes a huge loss. That’s not news.

We don’t stop driving cars because there are accidents. But we do drive safer.

Options can provide the tools for traders to protect assets, speculate and profit from big moves, and generate income. But, like driving a car, safety and knowledge are essential.

Eric Hale
OptionsANIMAL Instructor

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Edith Falls
Edith Falls
18:48 10 Dec 18
Jim Hores
Jim Hores
19:54 10 Jun 19
I found this to be an outstanding program - in-depth knowledge you cannot find anywhere else and the staff is always very supportive. I give it an A++.
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Jonathan Nelson
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Kevin Goodwin
Kevin Goodwin
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Merlin Andrews
Merlin Andrews
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By far the best educational source for options trading that I have found in my 4+ years of learning. An incredible amount of information, education, and support - worth every investment penny for anyone serious about learning options trading. The most helpful, passionate, and skilled instructors - all with different perspectives that make it easy to find your own path instead of getting told what your path should be.
Merlin Andrews
Merlin Andrews
16:01 06 May 19
The best options trading education available that I have ever encountered by far, and one of the best values in any education. Great instructors, a very supportive community, and a tremendous amount of information and content. Not get-rich-quick, but life changing if you are willing to put in the work.As a graduate of the program, I continue to learn and grow from everything provided by OptionsAnimal and continue to improve.
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john kraus
19:00 13 Nov 18
The experience and information have been outstanding thus far. I insist on thorough coverage when it comes to my interests and pursuits. OptionsAnimal are meeting and exceeding my expectations. The personel are very supportive as well. So far, i have interacted with Brice, Jordan and Warren. All of them were flawless in their professionalism and very personable as well. i never felt rushed in my inquiries and they efficiently offered complete and even comprehensive answers, making sure i understood what i was trying to learn. Thank you!! so far so good!John Kraus
Trask Messinger
Trask Messinger
12:57 05 May 19
thank you - very professional and informative Summit
DiVerge Fitness
DiVerge Fitness
17:35 22 Dec 18
Great service for learning the correct way to trade options.
Ken Carley
Ken Carley
10:59 06 May 19
Been a member for almost 9 years. Always learn something new when I attend their many free summits around the US. The instructors are great and very available to the students. Absolutely the best Options Education anywhere.
John W
John W
20:53 28 Jun 19
Brice is very easy to work with and does what he says he will do. Thanks again Brice for the good service
Peter Schulz
Peter Schulz
16:07 05 Jun 20
This company is for real! The education is top-notch and can help you whether a beginner or a seasoned veteran looking for new approaches. If you are looking for the resources you need to add options trading to your investing, I can't imagine a better place to get it. The community is amazing and supportive, the instructors are great, and the site has endless archives to go through. Following along with experienced traders as they identify, make, and then adjust trades really drives the lessons home. I wish I had joined this 10 years ago.
Gerry Young
Gerry Young
18:22 28 Jun 19
I've been an Options Animal member / student for a bit over a year now and am incredibly impressed with the organization, their depth of knowledge, their teaching methods and their support of their students. In fact, I just signed up for life time membership so that I can continue to make use of the resource for the rest of my trading career. Before becoming a student of O/A I had been studying options trading technique on my own, attending webinars buying books from Amazon & etc. for about three years and not doing very well at it. I was also trading equities as I had been for the past 17 years and my portfolios were increasing in value from my efforts but not by leaps and bounds. In fact I was just covering living expenses plus a little bit and looking for a way to become a more successful trader; hence my foray into options. Joining Options Animal was like stumbling out of the woods and into the sunshine. "Don't try to trade options until the end of the course when you will have learned how to do it." was their first piece of advice. ( Wish I'd had that tattooed on my wrist three years ago. It would have saved me a bundle.) Next piece of advice: "If you do experiment with trading options just count the results as increased tuition costs." (Yeah, I had to learn that the hard way.)Then they proceeded to a very detailed analysis of markets / equity trading with instructions on where to find the real information for fundamental analysis. This alone resulted in a measurable improvement in my efforts at equity trading. After that it was straight into options, "the Greeks" & etc.What makes the O/A teaching method a cut above anything else, in my opinion, is that there are four primary instructors all from different backgrounds who each teach all the lessons in the curriculum. All of their efforts are recorded in the O/A archives which gives the student the ability to gain exposure to the same material from four different perspectives. And because the instructors are continually presenting the material over time one can gain a better understanding from listening to the same person giving the same talk but in a slightly different way.Any points not clearly understood can be repeated instantly or reviewed in its entirety later. Students can also interact with the instructors in real time during the scheduled sessions or attend the weekly open forums to cover specifics and have additional questions answered. One is not locked into a rigid class schedule which is going to move forward whether the student understands the presented material or not.In addition there is a bulletin board / chat room organized by courses and lessons and related subjects where students and interact and learn techniques from each other and the participating instructors.Long story short: if you really want to improve your trading to the point where your success rate is above the ninety percentile point then Options Animal is what you've been looking for.
Sunil Tomar
Sunil Tomar
19:05 29 Sep 18
Nag Malluru
Nag Malluru
16:16 09 May 19
I like the education that OA provides and it is really interesting to see all these strategies in real world. I am seeing the difference already and excited to be part of this.Community and Live tabs are amazing and helps us to stay connected with the schedule and other member thoughts etc.
Karen Berliner
Karen Berliner
21:15 14 Nov 18
I first learned about Options Animal just about two years ago. I could immediately see what a comprehensive educational program it is and how I could become a successful trader. I finished the program in a year and am extremely pleased with the success I have had this year, far exceeding results obtained by the S&P 500, the Dow, and NASDAQ. Not only does Options Animal provide an excellent curriculum, it offers multiple ways for students to learn and each of the coaches is fantastic. They want their students to be successful. The changes that I have been able to make as a result of being a member of the Options Animal community have been important for me professionally and personally. I recommend it highly.
King Cone
King Cone
23:23 08 Nov 18
We have been with Option animal for 7 years plus. They have delivered on all levels. If you want to learn to trade options there is no better education. Make sure you finish all you levels before you start live trading if you don’t your education will cost you more as I learned the hard way . One other point make sure you try to attend as many conference that Option animal puts on you will not be disappointed .Your trading skills will get sharper and most of all you will meet a bunch of great traders
Samuel Chimento
Samuel Chimento
13:10 14 Feb 19
Hello,I have been an Option Animal student for 5 months now and have completed levels 1 through 3. So far I have learned how to make directional trades as well as high probability credit spreads"Even though I have only completed the first 3 levels my current trades are ranging from 15% to 47% profit per contract. The winners are steadily rolling forward.I am looking forward to completing all the levels and learning debit spreads, hedged trades, straddles, strangles, collars and winged spreads.This education makes option trading crystal clear and easy because you will have confidence in what you are doing and finally enjoy making money on a daily basis.Most importantly, take your time and learn the material in detail, I think that is the secret to doing well!Enjoy your education.Sam
Dr. Rina Shinn
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This is the program that I wish I knew at the beginning before I poured in ridiculous amount of money in order to learn about options trading. Highly recommended.
Bruce Ash
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21:22 01 Jan 19
OptionsAnimal has been a great experience. I have learned a lot about options. It is nice that you can learn at your own pace and get help as needed.
Sharon
Sharon
18:57 04 Oct 18
They have wonderful teachers, I learn a lot from them. Even the tuition is expensive, but from what I have learned, it is worth and will benefit for the rest of my life.
James Hutchins
James Hutchins
14:55 06 May 19
This is top notch education. They do not teach a “system” that works sometimes, but rather they teach you to really understand how to evaluate companies, structure trades based on your expectation, and most importantly how to adjust your trades in the event things go against you. One thing that I really appreciate is the caliber and dedication of their instructors. They do not constantly try to “upsell” you like other options education systems I have tried in the past. Options Animal provides both live and online education opportunities. It is not a “get rich quick” kind of a service. Options Animal is real education, and requires real study and practice to master. They give you the tools and training, and support, the rest is up to you. My wife and I are thankful to have found them!
BRUCE BAILEY
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This was my first Summit experience and I thought attending was very worthwhile. The programs and materials were helpful and the open session Q&A following the presentations was great. I left with six other OA members contact information to really get into the “community” feeling!
Howie Agster
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19:14 21 May 19
Webinars have great examples of a superb strategy trading options. First in money management and trade adjustments limiting losses. My choice for learning from the best.
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02:27 11 Jan 19
Steven Hollosi
Steven Hollosi
17:44 26 Jun 20
I have been trading options for several years with some success just as a hobby, when I decided to trade options as a business and a source of a regular income, i searched for an educational platform to enhance my understanding and of the market dynamics when it comes to trading option I discovered Options Animals, called them, confirm that this was an educational focused platform that I could benefit from. The rest is history, I could not be happier with the results and support I received over time. They will teach you on how to enjoy the success rate of 90 plus percent of profitable trading with a thoughtful methodology and a plan of execution.I am sold for life. Keep up the great work everyone.Thank you,Steven Hollosi
oliver fox
oliver fox
03:42 11 Nov 18
OPTIONSANIMAL,OPTIONSANIMAL,OPTIONSANIMAL!!!! the very BEST in options education.-------- the very BEST.
Rick Kingbury
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00:43 24 May 19
This training is so thorough and with the archives I can go thru a particular section until it sinks in and then I get that "ahah" moment when I really understand it. Great training. Rick Kingsbury
Dana Podliska
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21:36 04 May 19
Bill Madison
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16:42 07 Feb 20
The lessons are excellent, organized and easy to follow . Can take you from beginning student all the way through "PHD" level options trading. Several instructors to choose from (all good) and each has his/her own style to make learning FUN. The best part is : you become a profitable trader.
Jackson Simon
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19:58 25 Oct 18
Wonderful experience so far with this superior source of education on options trading. I continue to enhance my skills and knowledge week to week with the help of their highly experienced coaches and easy to follow curriculum. Learn to protect your investments now to ensure a brighter future in retirement and to pass on to your posterity. Highly recommended!
Blaine Jones
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01:36 25 Jun 19
Options Animal is one of the best, if not the best, educational experience I have ever had. If there were more than 5 stars I would rate them a 10.
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03:10 21 Dec 19
Fantastic Training that you can do at your own pace.
Kevin McDermott
Kevin McDermott
20:02 23 May 19
Even though I have been trading options for a couple of years, I was happily surprised by learning things I either did not know or did not understand as well as I should have.Excellent education program that is good for everybody from beginners to experienced options traders. Plenty of resources and actual people who can answer your questions or help you deal with any unexpected difficulties.Top notch organization doing top notch work. Check them out.
Jeffrey Nee
Jeffrey Nee
14:29 30 Sep 18
Excellent teachers dealing with a complex subject to a room full full of varying skill levels. They succeeded.
John Stuparich
John Stuparich
01:11 16 Jan 19
The Option Theory is adequate with but the concepts only really sink in when theory is further explained in some practical application examples or case studies using live and current stock prices .
Joshua Foss
Joshua Foss
18:23 29 Sep 18
Motivated me to learn more
s hart
s hart
21:26 04 May 19
The knowledge I've gained from being involved with Options Animal since 2013 has been extremely refreshing & tremendously helpful. I don't have to fret about what's going to happen with any trades I have going, because I already know what can happen in any type of market movement and thus, can prepare accordingly. If you have intentions of becoming a trader yourself, whether you're a rookie or have played with the stock market for years, this is the place you want to be to get you aimed in the right direction. The instructors are amazing - very knowledgeable & deeply caring. The membership community is wonderful. Getting with these people personally at the Summits is a great thing. You most-likely will end up with some wonderful friendships with fellow traders (and instructors) in the community. The things you can do with this education are limited only by you. Scott Hartman - OA Graduate
Joseph Woollen
Joseph Woollen
04:03 15 Nov 19
I have been pleasantly surprised with Options Animal. Having used other options training programs with limited success, going through the Options Animal courses has been like getting a graduate degree. Their courses are comprehensive yet understandable, and it’s particularly helpful to go into their video archives to take the same courses numerous times - each with a different instructor with a slightly different teaching approach. And it’s hard to beat theIr support and collateral materials. I highly recommend Options Animal. J. Michael Woollen
Kathy Bowman
Kathy Bowman
18:13 15 Jul 19
Markus Bandomir
Markus Bandomir
14:53 18 Jan 18
James Diehl
James Diehl
21:08 18 Jul 19
My wife and I have tried other on line trading academies and were not impressed with them at all. We became very frustrated to the point of almost giving up the idea of ever being able to learn how to trade options. We heard about Option Animal and decided to give it one more try and we are glad that we did. We were immediately impressed with the entire program. The lessons, both live and archived, are easy to follow and very well done making it simple for even the most novice trader to understand. The instructors are extremely knowledgeable and offer personalized attention when needed. We highly recommend Option Animal if you are serious about learning how to trade options.
Victoria L Roberts
Victoria L Roberts
22:35 02 Mar 20
They offer a systematic approach to options education. Each instructor has taken the courses. They are all intelligent, articulate and available to answer questions. No sales gimmicks just a commitment to the students. I highly recommend them.
Linda Wood
Linda Wood
18:20 04 May 19
Thom Ianniccari
Thom Ianniccari
18:07 29 Oct 17
Great education and support to learn to earn. I have done a lot of investing education and this is one of the few systems that gets a gold star.
Stephen Sorrick
Stephen Sorrick
20:36 29 Sep 18
The presentations were all highly informative.
Brian Hores
Brian Hores
13:59 11 Jun 19
A well structured curriculum to master the intricacies of options trading. Archived sessions allow you to go at your own pace and review areas of weakness. Live classes with instructors are interactive with a chance to ask questions. The teachers are great with helping to clarify issues and help you succeed. Following he Options Animal 6-step process will lead to trading success. The tuition is worthwhile compared to paying the school of hard knocks. I haven't mastered everything but am a much more confident and profitable trader.
Mr. Bodin Hugger
Mr. Bodin Hugger
17:20 13 Jun 19
Excellent training from multiple experts. Member as of February 2019. I have completed up to level 3. Trading options since 2009-2011 when one could throw a dart and win!Excellent archives for training classes with Kathy, Joe , Eric, Charan , Jeff, and Horace. These are excellent educators because of the different styles each educator brings to their client. OA Trader work shops offer insight on how to think. The Wednesday and Friday updates also educate the client on how to think. These updates educate the client on how to separate the noisy events from those that are important. Entering into the options trading world with out OptionsANIMAL training is foolish.I am very pleased with the value of my decision to join OptionANIMAL. I wrote with review on my own accord and will stand by this review. Bodin Hugger, JRMetaire, LA 70006
John Boulet
John Boulet
04:48 30 Sep 18
GREAT CONFERENCE !It became much clearer to me that options can be used to hedge risk AND be profitable at the same time.Would highly recommend Options Animal to anyone looking to improve their trading!
Curt Rosemann
Curt Rosemann
17:40 12 Oct 18
By far the best I have found for indepth training and insight as how Options really work. Logical class order. Highly knowledgeable instructors for each element whom can provide detailed answers to any questions.
Dana Podliska
Dana Podliska
03:41 18 Dec 18
Before joining OA, I had only traded equities and it was suggested to me to get into options. After watching tons of YouTube videos about how easy it was to make money using options, I felt that I was missing something. After some research into different option services I choose Option Animal and believe it was the correct choice for me. Through the teachers at OA and many hours of classes that they present, I feel like I am getting the knowledge and answers where all my other sources fell short. I am confident that after completing the courses I will have the knowledge necessary to trade successfully.
Susan Taylor
Susan Taylor
15:53 27 Apr 20
Options Animal is a very honest company. They will work with you if you need help.
Ivan Peytchev
Ivan Peytchev
21:44 04 May 19
Douglas Weed
Douglas Weed
22:45 23 Oct 18
Zack quickly answered the question I had about choices for brokerages with respect to commissions.
Peter Schulz
Peter Schulz
16:08 05 Jun 20
This company is for real! The education is top-notch and can help you whether a beginner or a seasoned veteran looking for new approaches. If you are looking for the resources you need to add options trading to your investing, I can't imagine a better place to get it. The community is amazing and supportive, the instructors are great, and the site has endless archives to go through. Following along with experienced traders as they identify, make, and then adjust trades really drives the lessons home. I wish I had joined this 10 years ago.
oliver fox
oliver fox
18:43 06 May 19
I am simply amazed at the amount of knowledged displayed by the option animal instructors at the Chicago summit.after having listen , and asking questions ,my knowledge of the stock market,and option has increased to a level way beyond that of the average trader. I am so thankful for finding optionsanimal.
Steve Rosenlund
Steve Rosenlund
22:16 04 Mar 20
Some classes are very technical, I can repeat them as needed. I would rather retake a class than see it dumbed down.
Amànda Dorion
Amànda Dorion
23:28 16 Oct 18
Options Animal has been great. The instructors are fantastic and everyone is always very willing to be available and answer any questions. The way the material is set up also flows very well.
Brett Johnson
Brett Johnson
21:39 12 Oct 18
am new to Options Animal since March of 2018 although I have traded options since 2011. While I am only half way through the curriculum, I find the content, instructors, and methodology invaluable. I very much appreciate the new view to trading that Options Animal provides, so much so I am considering migrating from a mix of stock investor and options trader to a pure options trader given the risk management and increased trade success taught at Options Animal.
Sergey Golub
Sergey Golub
21:22 19 Dec 19
If you a new or an experienced options trader this is very much desired service where you can learn a lot and get help when you need it most from live coaches at Options Animal.Keep up guys with great work!S. G.
John Daggerhart
John Daggerhart
19:30 24 Nov 18
Very straight forward solid education. No get rich quick B.S. Learn, follow, prosper!
Steven Hollosi
Steven Hollosi
17:14 26 Jun 20
I have been trading options for several years with some success just as a hobby, when I decided to trade options as a business and a source of a regular income, i searched for an educational platform to enhance my understanding and of the market dynamics when it comes to trading option I discovered Options Animals, called them, confirm that this was an educational focused platform that I could benefit from. The rest is history, I could not be happier with the results and support I received over time. They will teach you on how to enjoy the success rate of 90 plus percent of profitable trading with a thoughtful methodology and a plan of execution.
I am sold for life. Keep up the great work everyone.
Thank you,
Steven Hollosi
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