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Mihail Stoyanov's avatar

An insightful summary. I love the clarity of the rules. They remind me of the following maxim: simplicity beats complexity. Thanks for sharing.

Regarding options, I would like to add some color. Zero-day options and similar strategies are 100% crap. However, there are wealth-building strategies with options like LEAPS. They represent the opposite of short-term thinking approaches.

A properly selected LEAPS call (underlying asset's price well below strike price, implied vol below 40%, high open interest/volume, and at least 12 months to expiration) offers massive asymmetry skewed in investors' favor. For example, when the stock moves 40% to 60%, the call may move beyond 500%.

I have been using LEAPS calls to exploit strong impulse trends with 12-18 month durations. Of course, I am not saying options are easy to use; neither is it the only way to gain Alpha.

It is quite the opposite; options (even simple plays such as LEAPS calls) require experience and knowledge. Moreover, LEAPS are just another tool in the box of industrious investors. As a reminder, there are no all-round tools. The hummer does not screw bolts, nor does the screwdriver punch nails.

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