Secret 84ONLY PLAY WITH FUN MONEY
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One of the classic statements in the options game is “Don’t
play with money you cannot afford to lose.” This statement truly
applies to option buying, especially shorter term options where
the payoffs are few and far between.
In fact, I would be more emphatic here. Money you can afford
to lose is still money that you value. You need to play with
money that you are willing to light up with a match, money that
is treated as worthless plastic poker chips on a table. Casinos
make you use poker chips and tokens when you play slots or
blackjack and roulette so you won’t value them and be afraid to
play more chips.
When you buy options, set aside some fun money every year
and kiss it good-bye. (Look how quickly many of you lost valuable
money during the 2000–2002 bear market.) Why not pull out a
small amount of capital each year to apply to games you can have
a lot of fun at?
If you treat such money as fun money, you will be able to
withstand losing streaks and be willing to continue to take positions
until you hit the home runs. To be successful trading options,
you cannot have a faint heart but must plow ahead and buy
options month after month without quitting, knowing in the end
you will show a profit. The only way you can do this is to use fun
money.
Most investors fail at this endeavor, for they are not prepared
to stay for the long haul and will quit after taking a few losses.
One of the classic statements in the options game is “Don’t
play with money you cannot afford to lose.” This statement truly
applies to option buying, especially shorter term options where
the payoffs are few and far between.
In fact, I would be more emphatic here. Money you can afford
to lose is still money that you value. You need to play with
money that you are willing to light up with a match, money that
is treated as worthless plastic poker chips on a table. Casinos
make you use poker chips and tokens when you play slots or
blackjack and roulette so you won’t value them and be afraid to
play more chips.
When you buy options, set aside some fun money every year
and kiss it good-bye. (Look how quickly many of you lost valuable
money during the 2000–2002 bear market.) Why not pull out a
small amount of capital each year to apply to games you can have
a lot of fun at?
If you treat such money as fun money, you will be able to
withstand losing streaks and be willing to continue to take positions
until you hit the home runs. To be successful trading options,
you cannot have a faint heart but must plow ahead and buy
options month after month without quitting, knowing in the end
you will show a profit. The only way you can do this is to use fun
money.
Most investors fail at this endeavor, for they are not prepared
to stay for the long haul and will quit after taking a few losses.