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Optionetics Market Commentary

Seven Essential Credentials of Successful Optionetics Students, Part III


Jack Wong, Optionetics.com
April 21, 2008

 

Options trading to me nowadays is quite a boring business because my trading style does not require me to watch the market every night. During the good old days (I mean when I started this business), it was quite a different story. I watched the market every night and hoped to hunt for potential trading opportunities. I had the urge to put in new positions everyday, and at one time, I was even shocked when the screen jammed up with a lot of trades in my portfolio. Despite my above-average sensitivity to numbers (yes, I had the ability to remember 100 telephone numbers before cellphones becomes part of our lives), I started thinking about what exactly I was doing. Did it make any sense in the long run?  Did I trade too much?  Did I do these trades for the only purpose of exploring the so-called “my cup of tea”?  Should I continue with this? 

Fortunately, Tom Gentile and other fellow Elite instructors helped me achieve where I am today. I have found my old chairs, i.e. my Big-Mouth-Iron-Condor System, and some premium collection stuff in my portfolio. So, even during the huge market volatility in recent months, my portfolio continued to go up decently.

Here comes to Part III of this 7-part series. I wish to discuss “SMART” Goals as the third essential credentials of our successful Optionetics students. You may have heard Tom Gentile talk about having a goal in his 7 Habits of Highly Profitable Trader. If so, you may find some similarities between what Tom has said, and what I am going to say below.  I wish to submit to you that having a goal is crucial in all businesses, including trading (if you think that this is a business). However, a goal being a goal will be meaningful to you only if it is SMART.

 

SMART is an acronym (yes Singapore folks like to use acronyms all the time. Ask some of our US instructors who teach in Singapore …) which stands for

  • Specific
  • Measurable
  • Achievable
  • Realistic
  • Timed

Now, let discuss each component in a greater detail.

Specific

Are your goals precise?  In other words, you may say that the reason why you trade is to make more money or achieve financial freedom. But what is ‘more’ money?  How do you define ‘financial freedom’?  So, be as precise as possible when you set your goal. For example, your goal in trading is to generate X% return on your investment.  Of course, X% in this case can vary from one person to another. But at least, it is X%

Measurable

Are your goals measurable?  In other words, can you quantify your goals? It’s no point saying to yourself that you trade because you want to make more than what you have in your full-time job. As suggested above, your goal should be specific, and now you should also understand that it must be measurable. The statement “I wish to generate X% return on my investment” can be considered measurable as you can quantify the amount of return on investment you wish to achieve.

Achievable

Are your goals achievable?  I read with interest a recent post in the discussion board in which an aspiring student is hoping to make millions in options trading. To certain extent, this ties to what I discussed in Part I of this series. If you don’t believe you can do it, then it won’t be achievable. To achieve a goal in the first place means you must believe in yourself that you can do it. Your desired result may not come overnight. It may take some time. Nevertheless, you must believe that you can do it.

Realistic

Are your goals realistic?  Although your goals can be said achievable, you need to put yourself into a reasonable man on the street (yes, I am borrowing the famous reasonable bystander test that is frequently used in English common law here). Imagine if you just start this business, is it realistic to make $1 million in the first 12 months?  This aspiring student I mentioned above had only $3,000 to start this business. Do you sincerely believe that he can turn $3,000 into a $1 million in 12 months’ time?  It may be achievable because what he could do is to spot one opportunity and leverage himself over the hill. It could be a ‘make-or-break’ situation. But is this realistic? Imagine if he is wrong in this trade, he will be immediately out of the business. And I can bet you this aspiring student will blame everyone (including Optionetics for teaching him the ‘wrong’ thing) except himself.

Timed

So what if your goal is achievable and realistic, you still need to set your goal a timeline for yourself. It is no point to say I wish to trade and make a million. Period. If you don’t set yourself a timeline, human nature is telling us that more likely than not you won’t do it. A lot of us like to be pushed to do things. So, push yourself by setting a timeline is thus important.

So, let us look at the following example of a hypothetical new student who just attended his first 2-day seminar Optionetics and see how he set his SMART goal for Year 1:

“I trade options because I would like to build this as a business to provide an additional income stream other than my current full time job":

Year 1

I do not expect to make any money during my first year. The costs of purchasing Profitsource and Platinum, and the 2-day seminar fee will be reflected as education expenses in this year.

More specifically, this is what I am doing for the next twelve months:

First & Second Months

I will review Books 1 & 2, and DVD 1 to 3 of my Home Study Course. At the same time, I will install Profitsource and review the Manual. I will log on to Platinum Express to build the case studies discussed in the 2-day seminar, and track these trades.

Third & Fourth Months

I will review Books 3 $ 4, and DVD 4 to 6 of my Home Study Course. Continue to follow through the case studies using Profitsource and Platinum.

Fifth to Twelfth Months

I will look for the best available opportunity on a weekly basis with a view to building a portfolio using Profitsource. I will paper trade these weekly opportunities and follow through by using Platinum. I will also make sure that I have a trading plan setting out the various entry and exit points so that I learn how to be disciplined in my trading business.  I expect to have done at least 25 paper trades by end of the first year.

Please note that this example does not cover backtesting!  As discussed, different people may set their goals differently.

Year 2

I will leave you to decide how you want to set your SMART goals if you were this student …

You may find that this student’s goal sucks because he won’t be making any money in the first year. I respectfully submit to you that he will acquire valuable experience via paper trading and yet he won’t lose any real money. Of course, you are entitled to a different opinion.

To access previous articles written by Jack Wong, please click here.

Jack Wong 
Staff Writer
Optionetics.com ~ Your Options Education Site

 

 

 


  

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