After high school, I worked for my dad's plumbing company as part of his plan to push me toward college (which worked well, but that's a different story). I was excited to operate the big machines, but instead, this was my tool:
I was handed a shovel. That summer, I learned a lesson that applies directly to options trading.
While I expected to play on the backhoe (yes that is an actual picture of my dad on a backhoe), installing water and sewer systems. I spent most of my time with a shovel, digging trenches and learning the job from the ground up. This experience would later shape my approach to options trading.
If they let a teenager run a backhoe can you image how much damage I could have done? Forget about getting the water lines to the building, what about all the underground hazards I didn't know about?
Just like in plumbing, options trading can feel overwhelming with its complex strategies and leverage. From defined-risk trades like spreads or iron condors to higher-risk plays like naked puts or strangles, jumping to complex strategies too soon can lead to bigger losses. The most successful traders, much like the best plumbers, master a few simple, well-executed strategies before taking on more leverage. Let’s explore why focusing on one basic strategy—your "shovel"—can lead to consistent profits and long-term success.
The Power of the Shovel: Lessons from the Trenches
Learn to Manage the Dirt: With a shovel, I learned to move small amounts of dirt, ensuring the trench was level and at the right depth.
In trading: this means understanding how a basic strategy, like selling puts, get super comfortable with managing these before moving on to different strategies.
Build Strength and Precision: Each shovelful of dirt seemed small, but over time, I gained valuable insights.
In trading: each small trade builds your understanding of risk management, strike price selection, and theta decay. Don't focus on the size of the win, focus on the process.
Minimize Damage: Jumping to use the backhoe without proper experience could cause chaos—digging too deep or damaging pipes.
In trading: this leads to unexpected losses from complex strategies you don’t fully understand, you will lose while trading, learn how to manage with small trades first.
Consistency Over Complexity: Even after learning to use bigger machines, there were still times when a shovel was the best tool for the job.
In trading: if your simple trading strategy is generating steady profits, stick with it! We always want to make things better but sometimes staying small and staying mechanical is perfect!
Focusing on one strategy allows you to:
Improve Win Rate: Mastering a strategy increases your success rate.
Optimize Position Sizing: Better understanding leads to more effective risk management.
Compound Growth: Consistent small gains add up. A 1% monthly return compounded over 5 years results in a 79.6% total return.
I eventually graduated to larger trades using larger equipment, you’ll know you're ready for more complex trading strategies when:
You consistently generate profits with your simple strategy.
You know how to adjust to different market conditions.
You can effectively manage risk and position sizing.
Action Plan: Start Digging into Options Mastery
Choose Your Shovel: Pick a basic strategy (Selling Puts, Wheels).
Practice Your Technique: Paper trade to refine your skills without risking real money.
Start Small: Begin with small real-money trades to experience actual market dynamics.
Keep a Trading Journal: Track your progress and identify areas for improvement.
Stick to What Works: Don’t complicate things if your strategy is profitable.
It’s not about having the biggest machine—it’s about mastering the tools you have. Start with your "shovel" strategy, perfect it, and watch as you efficiently dig your way to trading success, one precisely controlled scoop at a time.
I talk strategy here in the blog, share trades in our Discord, and provide even more specific details to my Mr. Money Maxwell Inner Circle. While I believe there is an edge to be found, the truth remains: over time, buying and holding is historically profitable.
Happy trading, good kids!
-$Maxwell
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