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What's a Great Options Trader?

What does it take to become a great options trader?

What Is a Great Options Trader?

So, you wish to become a great options trader?

What exactly is a "Great Options Trader"? A great options trader is an options trader who is capable of consistently profiting from the options market over long periods of time enough to fuel any kind of lifestyle that options trader wants, independently, from anywhere in the world as long as there is internet connection. As such, it can be said that a great options trader is a person who has known true unbridled financial freedom. What is "unbridled financial freedom"? It is the ability to generate money every single month without being tied down to a single location nor taking up the majority of the waking hours. Indeed, for most people, making money means an almost equivalent commitment in time, energy and bondage to a single geographical location. A great options trader is indeed a modern day alchemist or financial wizard to whom producing money apparently from thin air anywhere in the world is a common, unsurprising, reality in life.

Modern Financial Wizard, the Options Trader

What Does It Take To Become a Great Options Trader?

If you are reading this article, chances are you are already an options trader with some degree of experience in trading options but you do not feel anywhere close to the description in the first section above. You probably struggle with getting comfortably consistent with your profits, with managing the impacts of every losing trade, with silly avoidable mistakes in executing your options strategy, with reading the market... etc. Basically, you are struggle with getting from the stage where winning is an occassional event to be celebrated to the realm where winning is an expected boring reality and losing has minimal impact. Indeed, nobody can become a great options trader or indeed even a full time options trader if you are still struggling to make winning a consistent, boring, expectable thing.

A lot of new options trader then waste all their time in the search of the 100% Winning Options Strategy or the Holy Grail strategy, which do not even exist. And indeed, as I explained in the article on how Winning Is Not Just About The Options Strategy, great options traders do not require such a thing in order to become the legends that they are. So, what exactly does it take to become a great options trader? Here is a list according to my own personal experience:

Conditions of a Great Options Trader

1. Deep Options Knowledge

2. Deep Market Analysis Knowledge

3. Real Proven, Well Designed, Options Strategies and Trading Plan

4. A Sizable Fund

5. Deep Realistic Understanding of Own Emotional Limitations

6. A Disciplined Lifestyle and Environment

7. Experience, Lots of Experience

Great Options Trader - Deep Options Knowledge

An unfortunate thing I see in the world of options education today is that weekend options seminars are giving non-options traders the wrong impression that you simply have to attend a single weekend seminar on options trading and you are all set to manifest the magic of modern financial alchemy. This has led to many disgruntled options trader wannabes and the well known saying that only 1% of the people attending an options seminar ever really trade options with real money and even less ever have any consistent result.

Unfortunately, options trading is as powerful as it is complex. In fact, it could be the most complex financial instrument in existence today which is why it is capable of financial miracles that is impossible using other financial instruments. In my personal experience, it takes an entire month of DAILY study and training to get a complete newbie to a state of being able to know what's going on in options trading, how the fundamental pieces work and be able to make simple trades and still we have barely scratched the surface of what options trading is and can do. To be a great options trader, you need to be ready for a prolonged learning process over a number of years, YES YEARS not weeks or months, under the mentorship of a true successful options trader, not a fake guru merely making a living from teaching about options trading rather than trading options itself. I touched on this issue in deeper detail in my article on How Long Does It Take To Master Options Trading.

A great options traders knows the whole in and out of the mechanisms of options as a financial instrument, not merely how to buy and sell options. Basically, a great options trader has no problem standing in front of a collage lecture theatre to delivery a lecture on options trading and be able to answer any and every question thrown from any and every angle of options trading. One cannot hope to become a master at something without such a deep expert level knowledge of the subject matter.

Great Options Trader - Deep Market Analysis Knowledge

As if just learning the financial instrument of options is not already hard enough and take long enough, a great options trader is also an expert and master in the capital markets itself. Why? Because options trading happens within the capital market and if you do not understand how the capital market works, you simply cannot hope to do well in options trading at all. A deep level of market knowledge is expressed in knowing the complex interactions between the capital market and fiscal / monetary policies (this is finance 101 in college...), understanding the impact of the global economic system, understanding how stocks and other financial instruments come to be in the market and how they interact with each other, understanding the behavorial patterns and anomalies of the market and more. Basically, a great options trader must always be able to make sense of what is happening in the capital markets. At no time can a great options trader afford to feel out of touch or lost with what is happening in the capital markets.

On top of that, a great options trader must also be a master at market analysis which includes the large, arcane and complex skill set called "Technical Analysis". Technical analysis on its own is a lifetime of learning and pursue by people who trades everything from stocks to futures to forex etc. A great options trader must be able to commit to learning and mastering the art of technical analysis all while committing the time and energy to a lifetime learning of options as a financial instrument.

Great Options Trader - Real Proven, Well Designed, Options Strategies and Trading Plan

I am going to break your bubble now. Whatever you knew as "options strategies" are NOT real strategies at all. What a strategy means is something you can use and follow and become successful at producing the result consistently, thats a "strategy" or a "trading plan". Whever you knew as "options strategies" is a misleading term for what I call merely a "Profit Concept" in options trading. For instance, a Long Straddle is not an options strategy. It is merely a concept that suggests that by buying a call option and a put option, you could potentially profit in both directions. However, how are you going to produce candidates for it, which exact expiration months and what considerations, what about the effects of volatility and other contingencies that may happen along the way? All these questions and MORE makes up what a real "Strategy" means. Too many beginner options traders are taking the "Concepts" to be the "Strategy" and therefore waste enormous amounts of time looking for that one holy grail strategy that does not even exist.

If a 100% winning options strategy do not even exist, how does great options traders consistently profit over the long term? The real key to consistently profiting is not in winning every single trade or strategy cycle, it is in the trade management and money management strategies that must be A PART OF every options strategy and designed SPECIFICALLY for the expected behavior and profile of that specific strategy! This is again why merely knowing what a Long Straddle is is merely knowing concept not a strategy. With a well designed money management / risk management strategy designed for the specific options strategy, one would be able to consistently bag in more profits than losses and make losses mere dents on the road rather than a collapse of the highway itself. Indeed, a great options trader is a great risk manager.

Great Options Trader - A Sizable Fund

This is quite often the breaker for new options traders. Options trading is less of a "get rich quick" thing than it is a "rich man's game". In general, if you fulfill the 3 conditions above, options trading becomes more profitable and more consistent the larger the fund size you have. A larger fund size allows for more mistake buffer, more loss buffer and in very advanced options strategies, is the only way to achieve the specific greeks configuration needed to make an options strategy work. In fact, there are many complex options strategies that simply will not work optimally with anything less than 100,000 usd fund size.

In general, the smaller your fund size, the more speculative your options trading becomes and the more speculative your options trading, the less consistent your results and the less confident you will be in making it a real source of income and livelihood. I covered this phenomena and why it is so in more detail in my article on The Simpler the Strategy, the Harder To Win. Generally, I suggest a minimum fund size of 50,000 usd when it comes to trading options. This is where a lot of new options traders trip up. They don't have that kind of money and is merely looking to options trading as a form of leveraged gambling trying to turn 1000 usd into 10,000 usd. Such an approach usually makes you lose that 1000 usd very quickly. As such, in order to become a great options trader, you need also to focus on ways to generate or secure a sizable amount of money and doing so only when and if you fulfill the 3 requirements above.

Great Options Trader - Deep Realistic Understanding of Own Emotional Limits

Great options traders are not superhuman who are fully in control of their emotions and always being able to make the kind of correct decisions under fire that normal people simply is incapable of doing. Nothing is further from the truth. If great options traders have a superhuman power, that is simply that great options traders are more REALISTIC than normal people about their emotions. Most normal people have unrealistic imaginations about how they will react under various situations and quite often, their reactions in those real situations surprises themselves. Great options traders have a deep understanding of their own emotional capacities, what triggers them, how they tend to react under fire, the trigger signs etc. In short, great options traders first have an extremely deep understandings of themselves as a person. This is also why I say options trading can lead one to full personal discovery and enlightenment. A great options trader never stops digging deep within his or her own mind and heart to discover and understand more about themselves realistically. With this understanding, a great options trader will build rules and procedures into his strategy and his environment in order to minimize the chances of getting triggered emotionally. Yes, realistically acknowledging the existence and extent of one's emotions and then building realistic and practical rules around them is what great options traders do rather than lie to themselves about their emotions.

Another aspect of emotional limit is understanding how big a fund size are you capable of handling. Everyone has an emotional limit when it comes to the amount of money they can manage and a great options trader knows that limit about himself or herself intimately. Most people experienced the frustration of winning when they have a small fund size and losing when they increased that fund size even though they think they were doing the same things. The problem is, once you exceed your emotional limit, you start to subconsciously make mistakes that you won't even notice. This is why great options traders understand this about themselves and never try to exceed their personal limits.

Great Options Trader - A Disciplined Lifestyle and Environment

And the above leads to the creation of an extremely discipline lifestyle and environment designed to minimize the possibility of making mistakes and triggering emotions. This is why real successful options traders not only have deep understanding of themselves but also a very disciplined, almost esoteric, lifestyles. Yes, indeed, it is not joke that i say real great options traders are on the road to spiritual enlightenment. Even their lifestyles and environments are designed that way. You simply cannot lead an extravagent lifestyle that puts you on the edge of your finances every single month thus putting you emotionally on the edge when trading options. You simply cannot lead a decadent lifestyle getting drunk and hangover every day and expect to focus and do well in the options market. You simply cannot have an environment that distracts you from doing what you are supposed to be doing and expect to have consistent results. You simply cannot be tired and exhausted from everything you are doing daily and expect to trade options with the level of focus that you need. Yes, in a way, rather than financial wizards, I would say real great options traders tend to be more like modern Financial Sages or Monks.

Great Options Trader - Experience, Lots of Experience

In the end of the day, even with everything above fulfilled, experience is that integer in front of your zeros. Experience is irreplacable in any field of endeavor and it is an unfortunate illusion that a lot of beginner options traders think they can become successful in options trading from knowledge alone. Most of my most successful students studied with me for about 10 years and they are now phenomenally successful full time options traders. And I would say 10 years is merely the minimum if you wish to become that level of an options trader. Why is that so? Because nothing tests your options trading knowledge and help you create a more complete options strategy more than being through one entire market cycle consisting of a 9 to 10 years run and a market crash, which takes an average of 10 years. Mere backtesting is not going to give you that real experience of going through a full market cycle which in reality has more to do with your emotion and how you react than anything else. In fact, to become a really GREAT options trader, it is my personal opinion that you need to go through at least 2 cycles of market crashes, which is an average of 20 years. First cycle, you learn the lesson. Second cycle, you prove you can survive and thrive. So, yes, experience, lots of it. How many of the above conditions have you fulfilled? How long more to your journey to becoming the kind of great options trader you dreamed of becoming? Do you have the grit and persistence to make it happen?

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