What are you afraid of?
Could you be bribed to face it? Afraid of heights? What if someone offered you $1,000 to walk across the Hoover Dam? Afraid of spiders? Is there a price someone could pay you to hold a tarantula?
I know that’s a weird way to open a trading post. But that’s exactly how I want you to start thinking about options.
Stock options don’t have to be scary or even dangerous when you simplify the application. It’s just an agreement between two people. Think of it like a bet. Or better yet, think of it like an insurance policy (because it is).
Now, here’s where most people get tripped up. Let’s simplify this. Say you own 100 shares of Kroger ($KR). You know people have to eat, you like the dividends, and you buy the stock. The stock goes up, your account has more money, you’re happy!
BUT when a stock pulls back, you start seeing red numbers and you get scared.
Scared of losing more, scared someone knows something you don’t, scared this is the one that doesn’t come back. That fear is way stronger than most people want to admit. And when people are scared, they do emotional things.
In the stock market, when someone is scared, they sell at the worst possible time. Instead of buying low and selling high, they start believing the company is going out of business… even when there’s zero evidence to back it up.
The coolest part? That fear isn’t free. It has a price tag.
Try buying homeowners insurance when there’s a hurricane sitting right off the coast pointed straight at your house. Good luck. Try buying fire insurance while your kitchen is literally on fire.
Sounds ridiculous, right? But that’s exactly what’s happening in the stock market every single day. When people get scared, the cost of insurance goes up. And if we’re the ones selling that insurance? Well, that’s a pretty nice place to be.
That’s the whole game. We’re not predicting anything. We’re not trying to guess which stock is going to the moon next week. We just sell insurance to scared people who are willing to overpay for it.
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The casino doesn’t sweat the next hand. It just takes the chips and lets the math play out over time.
So be the house. Not the gambler.
That’s how we turn knowledge into wealth.
$Maxwell
