My name is Mark Wolfinger and I’ve been using options since 1975. I
want to share some of what I’ve learned about options to help make your
investment club more successful. As a 23-year CBOE market maker,
author of three books on options, and a 10-year options educator, I
believe I can provide useful information and answers to questions.
Some of you may already know me because I’ve been replying to questions
in ‘Know Your Options’ at bivio for several years.
Options and Clubs
Traditionally, investment clubs invest carefully by taking the time to
do research, compare companies with each other, and select a business
whose stock they want to own. Over the years, these clubs build a
substantial portfolio of growth stocks.
I’m not suggesting that you do anything different. However, many clubs
currently use options as part of their overall investment strategy, and
your club may want to do the same.
Options were created to reduce risk, and I hope to encourage you to use
them that way. Many traders prefer to use options aggressively,
seeking very high returns (and simultaneously accepting significant
risk).
I want to be clear upfront. I don’t believe that investment clubs, or
the vast majority of individual investors, should use options to
aggressively seek big profits. To me, that’s gambling - or placing
your money on the outcome of an uncertain event - with no edge. The
main purpose of investment clubs is to help educate each of its
members, allowing them to eventually invest on their own. It’s true
that many clubs are more than mere places to learn. They have serious
money on the line and the goal is to earn a good return on invested
capital. If your club is in that category, options can provide
excellent opportunities for reduced risk as well as for increasing the
ratio of winning to losing trades.
Along those lines, I always stress the more conservative use of
options. It’s a personal choice when deciding whether to invest
aggressively or conservatively. Each club must make a group decision
on investing ‘style.’
I’ll make this thrice weekly blog suit your needs if you let me know
what you want to read. This blog is about options. I cannot help you
pick stocks, nor can I render any opinion on whether a specific stock
should be bought or sold.
I plan to discuss options: what they are, how they work, and how they
can be used by investment clubs.
If you have topics for discussion, please submit ideas.
Pre-polling tells me that most of you want to get stated from the very
beginning - and that means the most basic concept of options. I'll do
that, beginning next Monday. For the remainder of this week (Wed and
Fri), I have other topics to mention.