Most people are unaware of this, but I have two brokerage accounts - for good reasons. The first account is my main account, which is designed to give me stable growth and consistent cash flow from selling options - and the second account, is my smaller account, or what I fondly call my POP portfolio.
Why did I decide to separate it into two accounts?
The answer is because of volatility. I wanted to create a highly volatile portfolio that is positioned for high growth - to show that it is possible to grow from a small amount of capital. It just takes experience and skill set - both of which can be developed over time.
Don't Fall Into A Get-Rich-Quick Mindset
Most people won't admit this - but they try to look for the volatile strategies, simply for excitement. In fact, recently I received a message from a friend of mine asking me to trade cryptocurrency (which he says is exciting). Till date, I have yet to touch cryptocurrency since I don't know anything about cryptocurrency anyways. I am here to make money from the market - if I wanted excitement, I would have just went to a casino instead.
There is a saying, "high risk, high reward."
I choose not to use the word "risk" because the truth is that risk comes from ignorance. If we didn't learn how to fly a plane, then naturally, flying a plane would be risky for us. So instead of risk, I use the term, "volatility".
For example, cryptocurrency is a highly volatile asset. And it is true that higher volatility gives the possibility of higher returns, but why did I choose not to trade this asset then? Well, as I said earlier - I am ignorant about cryptocurrency and trading it will be like going to the casino.
I found the need to emphasize this because, I used to be looking for hype stocks to invest in, jumping from one boat to another, chasing one shiny object after another - trying to find that magic strategy. I then realised the wise words of Bruce Lee:
I fear not the man who has practiced 10,000 kicks once, but I fear the man who has practiced one kick 10,000 times.
I realised that if I can master one skillset well enough - then I could become very wealthy anyways. That skillset, was value investing using options and I continuously try to improve and refine this process.
The POP strategy is based on a modified value investing approach, where instead of buying stocks, I focus only on buying call options.
How It Works
The beauty of this strategy is that using call options require less capital and yet offer leveraged returns. To give a preview of the portfolio that tried this strategy for two months:
The returns are not super amazing (yet), since it has only been two months when I tried this on my POP portfolio.
The entry rules for the call options are exactly the same as what I have outlined in "Entry Rules Of Call Options" of the Options Investing Hub. The only difference is the portfolio sizing will be different, as shown below.
So in the above image, you can see that the portfolio is within the $10,000 to $30,000 range, hence I distributed the entire portfolio using call options over 4 companies. As your portfolio gets bigger, then you want to diversify over more companies.
You will notice that I did not include the portfolio sizing for above $100,000. This is because beyond $100,000 - I will recommend that we start to slowly transit our portfolio from POP to a stable growth and cash flow portfolio, i.e. something like my main portfolio. Of course, if you want to continue the POP strategy, that is completely up to you.
Personally, my end goal is to design a portfolio that grows stability and provides cash flow every month from selling options - it gives me the security to be able to know that working at a job is a choice and no longer a necessity.
So, if you want to implement this strategy, then head over to "Entry Rules Of Call Options" of the Options Investing Hub. Make sure to study the entry and exit rules carefully - and if you ever need help, shoot me an email at ginlim@passiveseeds.com
The Bottom Line
Before you go and implement this strategy, the most important thing to remember is consistency. Remember the wise words of Bruce Lee - you need to find what is that one "kick" that you want to gain mastery of - and avoid jumping from one boat to another. Because, once you perfect that skill set, you will never have to worry about money again.