For years, I thought there had to be a perfect strategy to make money in the stock market. I spent so much time searching for that magic formula, certain there was some secret I hadn’t yet uncovered. Maybe it was all about selling premium. Or perhaps long-term shares were the key. I didn’t know—but I was determined to find out.
The truth? There isn’t a single "perfect" strategy. The market moves in cycles, and it took me a while to realize that one approach isn’t enough. Selling premium can generate consistent income, but without long-term stock ownership, you’re missing out on the real wealth-building potential of share appreciation.
Why Long-Term Shares Matter
In today’s fast-paced trading environment, it’s easy to get caught up in the short-term mindset of selling premium. But here’s the thing—if you’re not holding long-term shares, you’re leaving a lot of money on the table.
According to J.P. Morgan Asset Management, between 1980 and 2020, 29% of all days in the stock market resulted in all-time highs. This shows that staying invested for the long haul is key to capitalizing on the market’s upward trends. Just selling premium or staying delta-neutral won’t allow you to ride the waves of appreciation the market offers.
Historically, the S&P 500 has averaged around 10% annual returns, and much of that comes from share appreciation over time. Like Warren Buffett says, “Our favorite holding period is forever.” When you own shares in quality companies, you not only benefit from their growth but also from dividends, compounding returns, and the potential for significant appreciation over the years.
The Limitations of Only Selling Premium
Now, don’t get me wrong—selling premium is a great strategy, and I do it myself. But it has its limitations. A study by CBOE shows that options-based strategies can outperform stocks under certain market conditions, but here’s the catch: options don’t appreciate like shares do when the market trends higher.
Take last year’s bull market as an example. Traders who held long-term bullish positions saw far better results than those who stayed neutral or focused solely on selling premium. Why? Because shares appreciate, and if you're not holding them, you're missing out on that growth.
A Balanced Approach: Diversify for Long-Term Success
Even seasoned traders like Tom Sosnoff focus on staying delta-neutral, constantly adjusting positions to manage risk. But here’s the thing—unless you’re working with a massive account size, this strategy alone won’t build wealth in the long run. The key is to diversify your approach by combining premium selling with long-term share ownership. This way, you’re smoothing out returns while still capturing the long-term appreciation of stocks.
Here’s what I recommend: divide your account into two sections—one for generating income through premium selling, and another for holding long-term shares in high-quality companies. For example, companies like Apple and Microsoft have grown massively in value and provided reliable dividends, further adding to your overall returns. In fact, dividends have contributed to over 40% of the stock market’s total return since 1930, according to a study by Hartford Funds.
Don’t Leave Wealth on the Table
If you’re only selling premium and never holding shares, you’re missing out on long-term gains. The market moves in cycles, and the best strategy is one that balances short-term income with long-term growth. Take advantage of both. Build a portfolio that grows steadily over time and in the short term, too.
Now’s the time to reassess your strategy—don’t miss out on the wealth-building power of long-term shares. Trust me, it’s a game-changer.
Happy Trading, Good Kids!
-$Maxwell
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