The knowledge required to invest and grow your wealth via ownership of assets, securities and commodities is not something that is taught in early traditional schooling.

Unless you pursue a degree in finance, chances are that you will have to educate yourself when it comes to understanding the mechanics of the stock market and investing.

Even if you do pursue a degree in finance at a traditional university, chances are that you will encounter heavy bias in what you are taught.

This can be due to various factors.

One factor is the state intervening in the education market by the means of regulation, subsidies, interest free loan backing, student debt forgiveness and state approved curriculums and agendas designed to serve individual interests.

If you are reading this in 2024 you are in luck.

There is currently mountains of free and paid educational content on the internet that you can utilise to educate yourself.

Content that is free from institutional bias and agendas that are pushed on either you, your children or people you know due to conflict of interest.

Albert Einstein remarked in an address given to the State University of New York in 1936, that the role of the school “must be the training of independently acting and thinking individuals, who, however, see in the service of the community their highest life problem".

“Education is what remains after one has forgotten everything he learned in school. It’s a miracle that curiosity survives formal education”. - Albert Einstein

You are on your own when it comes to moving forward and increasing your useful knowledge base in this world.

In my opinion it would be wise to assume radical personal responsibility when it comes to your self-education in the particular fields of economics, finance and investing.

If an activity such as financing useful, prosperity increasing businesses and increasing your wealth is of importance to you, then you will find benefit in learning as much as you can.

When it comes down to it, on a per capita basis the amount of high quality goods and services available to you in a society directly correlates to a higher quality of life. It is possibly the most important indicator of a societies prosperity.

The entrepreneurial spirit that it takes to create these goods and services should be embraced and supported. Unhindered by the state.

The great news for you is that you are lucky enough to be able to self-educate as to the process, and invest in these productive businesses by purchasing shares of a company on a stock exchange.

By participating you are helping to fund the future growth of that company and you could be potentially be paid a dividend for your contribution.

There is always risk involved in these purchases. The risk for the investor is that the market value of your shares could go up or go down due to level of demand on the open market.

There is also counter-party risk to consider. What happens if your brokerage decides to not release your funds to you?

You will need to consider and compare the relative risks of holding your currency in physical form, in a brokerage account or in a traditional bank account.

Options Trading Overview

I have recently been trading stock options contracts through the Interactive Brokers brokerage platform.

Options contracts exist from market demand.

They are a way to address the demand from investors to protect themselves from their shares losing value. They are also a way to achieve profits by speculating in the upside potential of price increases in a particular stock.

You have the potential to produce income by selling ‘insurance’ for stockholders by the means of selling a 'put' option. You can also sell the opportunity for someone to buy a stock that you own for an agreed price by selling a 'call' option.

If you are new to options, you can look at selling puts like you are selling insurance to people who want to protect against the risk of their shares being destroyed by a 'hurricane'.

There is a lot more to know about this process, I will explain a little further but I will save in depth explanations for a future letter.

The process has been very exciting, financially lucrative and a great learning experience.

At this point, and with some applied discipline, It looks as though I will be able to sustainably fund my international lifestyle and pursuit of increased personal freedom mainly through options trading.

It is a fantastic feeling *touch wood.

One that I have been working towards for a long time.

Oh but there is risk. My trading strategy will work if markets continue to exist and if they can continue to rebound after historically reliable stock market crashes.

Market crashes can happen and could happen in the near future, so that is why it could be a good idea to consider risk management with your stock positions. You could consider asset class diversification and hedging your stock market positions.

You could also hold a form of hard money that has been a store of value for over five thousand years.

That money is of course gold….

The Strategy

The options strategy I have been implementing specifically is called ‘The Wheel Strategy’.

It is a strategy where you can collect income (premium) by selling cash secured puts at a specific strike price. At the same time you will be able to buy the stock at a discount if the price falls below the strike price of the contract.

You collect income and you also get to buy the stock at a lower price.

Once you are assigned or ‘put’ the stock, if your contract expires 'in the money' you will then have to buy the stock at the strike price of the contract. From here you can start to sell ‘covered calls’ to begin collecting income on the stock that you now own outright.

Selling a call option gives the buyer the right but not the obligation to buy your shares at the agreed upon strike price of the contract.

If the stock price moves higher above the strike price of your contract, you may get assigned on the call option you have sold, you now have to sell your stock at the strike price. The strike price should ideally be higher than what you bought the stock for originally.

You can repeat the process again by selling puts to enter a new position. The strategy is circular, hence the name 'the wheel strategy'.

There is a lot more to understand in this strategy but this is the general gist of it. Don't worry if this is over your head, in time it will become clear.

95% percent of my trading at this time has been selling puts to collect income.

If you are planning to buy a stock, selling puts to give yourself the opportunity to buy the stock at a cheaper price and collect income at the same time is a win-win situation. You are collecting premium when selling the put and you also gain the opportunity to buy the stock at a discount.

When applying this strategy you may miss out on gains from potential price increases in the stock. If you were to buy the shares outright you may be able to make more money initially.

Although, if you are bullish on the company moving into the future, selling puts to enter a position is a very safe way to generate income and acquire the stock at a price that you are happy with.

In the long run your returns should be higher than just buying the stock directly and holding it.

Opportunity To Increase Personal Freedom

If you are looking to increase personal freedom in your life and live an international lifestyle, options trading is one viable way to do it.

I personally plan to combine options trading, dividend investing, stock speculation, precious metals ownership and my one person creator business to provide income and grow my wealth into the future.

Much the same as with investing, I see it as wise to diversify income streams by working towards having multiple reliable income streams.

There is a fairly steep learning curve to understanding the process of options trading. Although like anything, it can be learned and understood with some dedication, hard work and genuine curiosity.

I personally worked through a paid options course along with my own research and study.

If you are looking for some free resources to get started, I can suggest checking out the ‘Invest with Henry’ YouTube channel, which contains tons of free educational content and courses. Henry also has a paid course available and a great Discord community with weekly group coaching calls that are very helpful.

There is plenty of activity within the community and I have found the input and resources to be extremely helpful.

I can also recommend Interactive Brokers as a trading platform.

To my knowledge they have access to the most international markets (stock exchanges) out of any brokerage. In my opinion they provide a rock solid trading platform with only a few operational software bugs I have experienced here and there.

Keep in mind that you will need level three options trading permissions to be able to sell puts on Interactive Brokers.

Brokerage platforms have certain minimum requirements that need to be met before granting you trading permissions. You may have to do a knowledge test and answer multiple questions regarding personal assets, income and financial liquidity.

Thank you for reading, I hope you have gotten some value from this letter.

Until next time.

Shernon

*Not to be construed as financial advice. This newsletter is for informational and entertainment purposes only. Please perform your own research when making financial decisions.