I think what he's talking about, is the stock-market equivalent of taking all of your stimulus check, cashing it in at the casino, and "put it all on black".
Of course, hindsight is ALWAYS 20/20, and if the stock market was really "that easy"... no-one in this country would be "poor".
Meanwhile, in the real world, little Timmy needs an adequate laptop for distance-learning, and Mom needs rent and grocery money.
Edit: And what Ponyo, so enthusiastically ISN'T telling you, is that if your stock-market WAGER, using LEVERAGE goes WRONG, you could be on the hook for MILLIONS, and have to sell your house, your car, etc. (The casino bet is safer.)
Options can be risky. It's definitely advance level stuff but it's not difficult to understand. You don't need PhD to understand the concepts.
Option is zero sum game. For you to make money, someone else have to lose money. Option is written contract to buy or sell stock at certain price by certain date. 1 option contract is equivalent of 100 shares. What makes options so difficult is that not only you have to be right on the direction of the move, you also have to be right when that move is going to happen since options have expiration date. So you have to be right about the direction, time frame, and also magnitude of the move since you also have to select the strike price where you think the stock price will end up at certain date. If stock price doesn't hit the option strike price by the expiration date, your option goes to $0 and you lose the entire amount of your option bet. There are option plays where your losses are unlimited and also plays where the most you can lose is the amount you pay to buy the option. Option topic is way too complicated to explain here but you can google or Youtube options if you're curious or want to learn.
Option is leverage since each option gives you control of 100 shares of stock. Leverage cuts both ways and you can make or lose money quick. If you're stock market noob, you should definitely stay away from options.
I'll show you two of my option plays I'm currently holding. Both are TSLA call options. First one is TSLA Jan 15, 2021, $60 call option.
I own 5 of this $60 call option. What that means is I have the right to buy 500 shares of TSLA stock for $60 /share til the end of Jan 15, 2021 since each option is equal to 100 shares. Since TSLA stock price closed at $705.67, I have a profit of roughly $645 /share since I can buy TSLA for $60 /share and turn around and sell it for $705.67 each. I own 5 call options or 500 shares so my profit is $645 x 500 shares = $322,785. The above picture is showing profit as $319,099. And that's because the bid/ask spread is quite large on option that's super in the money like this call option. I purchased this call option back in Sept 2019 for $7.90 or $790 each option. Since I have 5 of this call options, I paid $39.50 or $3,950 total since each option is 100 shares of stock. The maximum amount I could've lost on this bet was $3,950 which was the total amount I spent buying the 5 call options. Meanwhile, my $3,950 bet is now worth ~$319,099 or return of 8,077%. That's almost 81x return. TSLA didn't go up 81 folds in the last 16 months. Which shows you the power of option and leverage. I also had bunch of $85 call options as well but I sold those during the corona panic back in March this year. If I still had it, I would have had 25,833% return on those $85 call options or 258 times my original bet. I had so many TSLA call options this year. I don't want to think about tens of millions of dollar potential profit I left on the table by selling those options early and not holding it.
I'm going to sell the TSLA $60 call option in the next 2 weeks to lock in the gains. Since I held it for more than a year, it's longterm capital gains and I will have to pay around $94,000 in taxes to the Fed and the state of GA. That will leave me with around $225,000 which will be enough to buy the new Tesla Roadster which is $200,000 plus another $16,000 in sales tax. So $216,000 for the Roadster. Paid for by $3,950 option bet I made.
This second option is another TSLA call option bet. It's a recent bet I made less than 1 month ago. I bought it to sell on TSLA S&P 500 inclusion day but I forgot I had these because I had bought so many TSLA options in so many different brokerage accounts and simply forgot about these. So I decided to hold these until 2021 to sell since it was already botched trade and to push out taxes til 2022.
The above picture shows five of the TSLA Jan 15, 2021, $500 call options. I bought it when TSLA was trading around $615. I paid $125.43 or $12,543 for each option. Since I bought 5 call options, I paid $62,715 total. I chose to buy deep ITM call options because I wanted cheap leverage while paying the least amount of call premium. 5 call options allow me to control equivalent of 500 shares. The five TSLA $500 call options are now worth $103,200 total giving me profit of $42,780. That's with TSLA stock going up about $90 since I bought the TSLA $500 call options. If I had instead spent $61,500 buying 100 shares of TSLA stock instead of options, I would've made $9,000 vs $42,780 on the same $90 increase in TSLA stock price. Again, the power of leverage. But leverage works both ways so if TSLA stock price had dropped by $90, I would probably be looking at $42,780 loss right now vs $9,000 loss if I bought the 100 shares of the stock. As you can see, options greatly magnify your gain and loss. Leverage is very dangerous when used incorrectly or the market moves against you. You have to have different mentality if you mess with options. Basically, you have to have no fear and zero fear of losing it all. You have to be willing to lose everything. Only then do you have even a chance at winning. To make big money, you have to not care about money.
