Bedros Keuilian Podcast Show - EMPIRE : Jon and Pete Najaran - 155

Episode Date: June 29, 2020

There are a lot of ways to generate income, so much so that a lot of them fly under the mainstream radar. One of those methods that goes unnoticed is trading what is known as “options”. In Today��s podcast, Bedros connects with Former NFL players turned Money masters who share the world of trading options in the simplest way possible. Enjoy !  Here’s what you’ll discover: 7:30 - The Options for Trading  15:00 - Why Options are so Powerful 26:00 - Why You Do the Hard Stuff First 35:00 - Warren Buffett’s Genius explained   “If you win the morning , you win the day. If you win the day , you win the week.” “Dominate the thing you hate most first and the rest will be easy” “The ability to take something complex and dilute into a simple concept is a gift” - Bedros Keuilian --   Follow me on Instagram: @bedroskeuilian   Buy Man Up and get Bedros’ High Performance Leadership Course for FREE: https://manup.com/   Subscribe to My Channel for weekly videos: http://www.youtube.com/bedroskeuilian/?sub_confirmation=1   Youtube https://youtu.be/N_QIlFMu98k

I'm doing it every day, and it's one of those things where you get into a routine, which you've got to have. And if you've got that, that certainly helps. But that whole thing builds you into that discipline that we talk about. I mean, by getting up every day, just like, I mean, look at you. I mean, you're getting up every day. Go on. Tell me one. No, but the reality is you wouldn't look the way you look if you didn't do it every day. You got to do it every day.

Obviously, there are breaks here and there, but you got to eat right. It's everything that goes into the whole thing. Sleep. Yeah, it's sleep. It's eating right. You know, it doesn't mean we don't have fun and go out and have beers here and there. I mean, of course. You've got to treat yourself once in a while, too.

But the reality is you've got to figure out, okay, and, you know, I joked about it today. John and I were just down on the beach today. And I was saying, you know, when the sun was coming up. Yeah, the sun hadn't even come up. Yeah. But, you know, if you're hooting with the owls, you still got a sore with the Eagles. No matter how late you go out, you still have to show up in the gym the next day. And that's part of the discipline because if you can do that, then you can do that with your trading.

That way you're taking, and the biggest key I can tell you is, you've got to take emotion out of it. It's not about emotion, it's about when I put on a trade, what am I gonna do? And if you already know that, the second you put it on, makes it a lot easier. Hey friends, my name is Bedros Kulian, and this is the Empire Show.

It's an inside look, and today we've got two really awesome guests because they're a fellow Armenians, and there aren't too many Armenians making a big dent in the entrepreneurial world and in the industry that we serve. So I'm really happy to have these guys, here, you might know them from CNBC halftime report and fast money. John and Pete Najarian. Welcome.

Nice to see. Thank you guys for being here in the Empire Studios. So it's cool. Man, what you guys do is pretty awesome. You take really investing and growing your money and you simplify it. Yeah. So explain to us how you got into this because when I look at you, you guys are two towering men, right? We look like typical Wall Street, don't we? Yeah, yeah, absolutely. The beer,

the hair, yeah, the blingage, and most importantly, the fact that you came from the NFL, right, Pete, and so how do you even get into this? How do you even end up on TV? How do you understand trading and money so well? John, I'll let you start off. You're a little older, so you get to try. I played four games for the Bears Bedros, and then I got cut. And I got cut. Oh, you were in the NFL too. I apologize. Yeah, no, no, but I never. I mean, Pete played for seasons, six years in the NFL and World League. I played four games. So that's why you didn't do wrong.

I don't understand sports, but I know our viewers and listeners do. So explain the position, the era, the time that you played. So I was a linebacker for the Chicago Bears. The same draft as Mike Singletary, Todd Bell, Leslie Frazier. Many of these guys are coaching, of course, in the NFL right now. Keith Van Horn. So many people that were. instrumental to them going to the Super Bowl.

I, unfortunately, was not. I got to play four games because Mike held out on his contract, Singletary, that is. He's in the Hall of Fame right now, and he's kept me from being in the Hall of Fame. Gotcha. But it brought me to Chicago, Bedros, and I had a great time with the Bears. And that discipline, which is why I really gravitated towards what you do, because the discipline that it takes to be a professional athlete is the same, discipline that you have to have to be a successful entrepreneur, or a successful trader.

And so that's really how I got into the business. And then Pete was playing all over the NFL for the next six years, because he's six years younger than me. They always say, oh, you guys are twins. And I'm like, it was a really- One of us should be offended. Are either one of you offended? No, I'm not. Long gestation and tough on our mom for six years for her to carry Pete. But it was, Pete every year that when we were trading would come through Chicago, either to or from the teams he was playing for. Stop, check it out for a week,

and then continue on down to Tampa, Minnesota, Seattle, wherever he was going. And at the end of his playing days, he said, I'm going to come down there and trade because this is cool. All right. But you played those four games for the Bears. At that time, you didn't know anything about trading. No, didn't. I mean, you were like, hey, this is my career.

I'm going all in. Yeah, and I hated it. Really? Hated it. Yeah. How did you hate it? Because I didn't understand it. I mean, we can all figure if you buy a stock at one price and you can sell it at a higher

price, you made money. But I wasn't just trading stock. I was trading options. And options are mystifying to a lot of people. And for me, it took a good three months before I really understood anything about what was going on. So instead, and no one was teaching me, Bedroast, because back then it was a big secret. They didn't want you to know because then you'd take food off their plate, right? Gotcha. And when is back then? Are we talking? 1981. 81. That's how old I am. Okay. It's funny.

1980 is when I came to the United States. We escaped. By the way, were you guys born here in the States or we were? You were. San Francisco. Yeah. A lot of Armenians there. Yeah, yeah, yeah. A lot of Fresno, Glendale. Uh-huh. Yeah. Yeah. You know the, so my dad, as you guys know, Glendale is like the Armenian capital here nearest L.A. And my dad decided that we're going to stay in the Santa Ana and then ultimately we moved to Anaheim, which is about 45 minutes away from Glendale. And for immigrants, that might as well be 45 days away, right? I mean, we're going to go like a horse and buggy back then.

We came here very broke. And later I asked my dad, why not go to Glendale where everyone speaks to Armenian? They're going to help each other out. He goes, I wanted you guys to assimilate, meaning myself and my brother and sister. And I believe that was the greatest gift he gave me. And it was the harshest punishment that he and my mom had here in the States. To be away from everybody. Yeah, right?

Yeah, to have to deal with so much bigotry and go back to your own effing country. Like, I would hear that. Now, if we were in Glendale where everyone's Armenian, you wouldn't hear that because Glendale is pretty much a miniature Armenia, right? So anyway, it's nuts how things unfolded. I'm just so grateful that my dad decided to do things the hard way for us. And I love, by the way, you have a great reading voice because I'm dyslexic. So I have a lot of learning disabilities that go along with that.

I think Pete has some of that too. But I listened to your book. So I heard you read it. And the book is great. Man Up is a great book. You do warts and all. So it's totally exposing yourself and saying, this is why you can do it too. Because I did it.

Look at all these things I see. screwed up at and then you overcame it and you did it because you stuck with it. Yeah, which is exactly what you've done obviously since you, so you get out of sports and you decide that I'm going to take this path and arguably you admit it. You didn't know what options were from stock. So I'm 45. I still don't know. Explain it to me and explain it to our audience because we might want to trade options. Sure. It's believe it or not, it's one of the ways Donald Trump made an awful lot of money because not real estate it is with real estate but options on real estate in other words just like Disneyland let's use that instead because you know right and the left they're going to say

oh he's sticking up for Trump or not sure sure let's look at Disneyland Disney World in Orlando was the vision of Walt Disney but if anybody knew he was buying up land in Orlando it would have gone up like crazy so what he did was he'd go to you and he'd knock on your door and say bedros you've got this 77 acres. You willing to sell it? Bedros would say, for the right price. And then he'd say, okay, how's $3 million sound? And let's say that you said, yeah, that sounds great. I'll buy an option for $300,000. I'll give you $300,000 to have the right to buy your property for one year. Is that a deal? And you'd go, and if you don't buy it in a year, you walk away, and I keep the $300,000? And he says, yes. Now, this isn't Walt Disney. This is one of his agents doing this.

he went all around Orlando doing that. And he didn't exercise that right to buy those properties until he had enough land. If anybody knew before that, of course, again, the price would go up like crazy. So an option is really just saying, you know what? I think Facebook's going to go higher bedros. I think it's going to be more like $250 a share instead of $215 by June. Okay. What if I buy an option that gives me the right to buy?

buy it at 215, but I don't buy the stock now. I give you some money for the right to take it from you at 215. And a lot of people will say, yeah, you can have that. You can take my stock at 215 if you're going to give me 20 grand right now. Sure. That's an option. Is the benefit of that am I hedging my bets? Is that what I'm doing? Yep. What's like what's the benefit? Controlling your risk. Leverage and leverage. Yeah. Gotcha. And that's what really attracted him to it because Pete was pre-med, and I'll let him tell his backstory, but very smart guy. I've never seen anybody learn options faster than Pete. Gotcha.

Well, first of all, Pete, tell us how you ended up playing for Seattle. Seattle, Minnesota, Tampa. I played. I was a sort of part of the Raiders franchise, but I wasn't actually on the team at the time. I had a tryout, and then they paid me to stay there, which is illegal. But it happened. But it's the Raiders. But I was able to go surfing every day and eat.

And as long as I understood the playbook, which I was given, I was there at their beck and call if they needed me. I was right there in town. And your position was what? Middle linebacker. Okay. So you were both linebackers. Yeah.

And then I actually ended up playing in the World Football League in Sacramento, California, which gave me the opportunity to travel and play over in Europe, play up in Canada. I actually, even for a brief time, played in the CFL for the Toronto Argonaut. So I really bounced all over the place because I really bounced. Football was my passion. I absolutely loved it. There was nothing about it. I didn't love, even with all the pain and all the anxiety and losses and wins and everything else.

The greatest sport in the world, I think. How many years did you play football? Well, in total, I'm not sure, but in terms of professionally, I think I had an extra six years after college. Really? So I banged around, had a lot of operations, had just about everything on my body break. But that's just part of the game. And hopefully, you know, you always hope your brain's going to be okay for the. extended future. This whole CTE thing is an issue that a lot of guys are doing. Were you guys aware

of that as much as we are today? No, no. I would say, you know what? The biggest concerns when I was playing, which is just a few years after John, really was your knees, your knees, your shoulders, those kinds of things. That's what you're worried about. Nobody really fully comprehended, I don't think, the issues with the brain. Right. Until that became far more popular and then suddenly everybody was talking about that. Well, I imagine when you get a concussion, you're not immediately getting those side effects until years down, or the effects years down the line. The major effects, yes. You're getting the short-term effects for sure. Yeah. But, you know, people ask me all the time, how many concussions do you think you had?

And I'd say, well, triple digits, maybe more. And people look at, you know, if they think you're crazy. But if you include all the times, you see stars, all the times that you had these episodes where you couldn't see, your vision was blurred, you couldn't see the sideline, all the rest of that. John played in Soldier Field when he was with the Bears for those four games that he talked about, I'll tell you what, that was one of the hardest surfaces in all the NFL. So when you hit there with your head first, it just caused your whole brain just to feel like, you know, this is pre-turf and all the rubrides. This is just, I mean, there was a carpet, a quarter-inch thick, and then there was a quarter-inch pad on top of cement. And

when I played in the Big Ten, there was only, there was only one school in the Big Ten when I was playing college football with natural grass. That was Purdue. So everything was on our artificial turf. We played in a dome in Minnesota. So, you know, when you go through something, something like that, the number of times that your head absolutely was the first part of your body to hit the ground is you can't even add up the numbers. So, but, you know, the equipment was pretty good. And as long as, fortunately, I don't feel any side effects. I recently did a scan and study of my brain and how I'm functioning and everything else. And so far so good. Pretty pleased about how things are going. But so I banged around in the league for a long time and had a lot

fun and I always stopped by and saw John no matter where I was I'd stop by for a week go down to the trading floor it was very interesting but I was pre-med I wanted to be a doctor but as time went on and on and on suddenly I'm pushing 30 years old and I didn't know if I really wanted or had the patients to wait and go to medical school so I just called John one day from Sacramento California I said hey my season's over we won the World Bowl which was really exciting in 1992 and didn't know exactly what I was going to do but I'd have to wait almost a full year for med school. So I just told John, I said, is it okay if I come there and just give this a shot for a while? And I did. And he was very kind to say I was smart and he was very

kind to say that I learned fast, but I got to tell you, Bedros, I sat there for three, four, five months just staring up and just trying to figure out what in the world was going on. It is a, options can be an extremely confusing world. But the options then and the options of what we do now is completely different. Now, Well, now we're market takers. In other words, we decide what we want to do. When you stand on the trading floor, you literally are like a bokey. I mean, you're standing there and you take one side or either side of what somebody's trying to do.

If they want to buy, you sell it. If they want to sell, you're the buyer. That's completely different than what we do now. Now we choose. We're watching the markets. We're looking for what we call unusual option activity. When we see that, that's something where we say, you know what? Somebody just bought 10,000 of these.

That's a huge number. This is a big commitment. They think the stock is going to be moving to the upside in a short period of time. I'm going to buy along with them. So now we have a choice. So it's a lot different than when you stood on the trading floor trying to figure out how to manage all these different positions, all these strikes and all these months. And that was something that was very, very difficult early on for me. That's fascinating.

I'm curious. Why the love of options? Is there something about options that really attracted you guys? Well, there's a whole lot. If you were to coach me, would you say, hey, hey, Vedros, you've got. this money, put it in options instead of trading something else? Yeah, I would, because you can define your risk when you enter. So, for instance, Facebook right now, to pick that one that I used earlier, it's $215 a share.

So 1,000 shares, it's $215,000. Okay. That's easy math, 215 times a thousand. So what if I told you you can control that same amount of stock, not with $215,000, not with $100,000, but with $10,000, $20,000. You'd say, is this black magic, John? What are you doing? And I'd say, well, the trade-off, Bedros is that you only get the right to buy that stock

for one week, two weeks, three weeks. You pick the time frame. So if you want to, the longer you want to own it, the more it's going to cost you. If you're saying, I think this thing's going to move right away, John. Because I mitigate the risk, the longer I own it. Yep. Or the longer I have the right to own it. Yep.

Got it. But now when you're buying short term, you're saying, I think something's going to going to happen right now. I think it's going to happen fast. And because of that, I'm willing to buy a two-week option, meaning literally that. You have 14 days to be right or that option is worthless. And maybe you paid me $15,000 for that right. Now, if you are correct and the stock goes up during those two weeks, maybe you turn 15 into 45. So you just tripled your money. For you to triple your money on a $215 stock, buying the stock, it needs to go over $600 a share. So that's why we would say you can define your risk. Like Pete says, you get leverage. Leverage is the key.

And it keeps you interested. You're focused on this thing all the time. And you're a disciplined guy. I mean, and we like to think we're disciplined people as well, because you have to have discipline to say, you know what, I was wrong on this trade. Or if you're right, then when do you start taking some of it off. And that's a big element, too, because if you are so right and you're a pig and you wait too long and then all of a sudden the stock pulls back for whatever reason, something happens in the Middle East, whatever it might be, and the market starts to come back down and your stock comes down with it, Facebook in your example, and you miss the opportunity, it's because you didn't have the discipline to say, I need to take this off.

What does it mean when you say if you're a pig? Well, pigs stay too long, you know, pigs get fat hogs, get slaughtered. And so, you know, it's one of these situations where you can't be a pig, you have to be disciplined, you have to make decisions on, okay, like John and I, when we make a trade, the second I put on a trade, I know exactly my exit points. The second I put it on, if I pay $2 for an option and it goes the wrong way, I'm going to be out at a dollar. On the other hand, if it goes higher, I'm going to be out when it doubles, and then I'm going to hold some of it for anything more. Sure. Or I might trade the whole thing and just be out because it worked out. Right, but you've got to be disciplined. You have to be. That's the discipline. Because the greed glands

can kick in very quickly. And it's no different that of the blackjack table or a poker table. Right. Right. It is no different than that. That's exactly right because a lot of people, Begros, will say, well, I'm playing with the house is money. I mean, I bought this call or I bought the stock.

It doesn't matter. And it's working for me. And now I'm playing with the house's money. It's always your money. If you put money down, it's your money. And so every second that goes by, you ask yourself, would I put down the same amount of money now as I did three days ago when the stock was 215, now it's 225, it made a big pop. I want to take some of that money

off the table. Other people might say, well, you're playing with the house's money. You're already $10 in the money, 10 money good, and all that kind of stuff. Gamblers ruin. What you want is discipline and you have to be disciplined about taking profits. You know, it's, like I say, from your book, it's the same thing. If you're not managing your business and saying, you know what, yeah, business is great, but I don't really care if I'm losing money here. here or there because all these new customers are pouring in. I'm making all this money. As soon as you're not disciplined, that can go away like that. And so what we preach is you've got to be disciplined about taking profits as well as cutting losses. And if you do that,

you can be at the tables a long time. So with that comes a lot of emotional discipline as well, not just money discipline and controlling your greed, but emotional discipline because the highs and lows. We've seen in years past economic crashes where people have committed suicides. Oh, yeah. Right? In the most recent housing economic crash. And then in the 80s, the stock market crash. And so what does emotional discipline come into that? And how do you guys manage your emotional discipline? I think the greatest thing that we both took away from our sports careers was the discipline that we're talking about. And so you've got to be disciplined. And it doesn't just start at the middle of the day while you're trading. It starts the beginning of the day. And every day,

John and I both start off, we work out. We have a routine. And everything's part of that. He's in Minneapolis and Chicago. Oftentimes, we used to. We're together. Yeah. But, you know, it's something I know he's doing it every day. I'm doing it every day. And it's one of those things where you get into a routine, which you've got to have. And if you've got that, that certainly helps. But that whole thing builds you into that discipline that we talk about. I mean, by getting up every day just like, I mean, look at you. I mean, you're getting up every day. Go on. Tell me one. No, but the reality is you wouldn't look the way you look if you didn't do it every day.

Sure. You got to do it every day. Obviously, there are breaks here and there, but you got to eat right. It's everything that goes into the whole thing. Sleep. Yeah, it's sleep. It's eating right. You know, it doesn't mean we don't have fun and go out and have beers here and there.

I mean, of course, you've got to treat yourself once in a while, too. But the reality is you've got to figure out, okay. And, you know, I joked about it today. John and I were just down on the beach today. And I was saying, you know. When the sun was coming up. Yeah, the sun hadn't even come up. Yeah.

Yeah. But, you know, if you're hooting with the owls, you still got a sore with the Eagles. No matter how late you go out, you still have to show up in the gym the next day. And that's part of the discipline, because if you can do that, then you can do that with your trading. That way you're taking it, and the biggest key I can tell you is you've got to take emotion out of it. It's not about emotion. It's about when I put on a trade, what am I going to do? And if you already know that, the second you put it on, makes it a lot easier.

Fedros, let me tell you, as far as when you're experienced, you know those endorphins when they're popping whether it's the gym whether you're running whether it's you know you know on the on a conference call getting a bunch of guys fired up i mean those those uh endorphins pop and that feels great and it's like applause pete and i always said you know that's why you like it in the pit it's not really there anymore but when there was pit trading it was just like applause it was like you were hearing 70 000 people chanting bed rose bedros. It's like that.

Because, you know, the hair goes up on the back of your neck because you're winning. But quick story, there's this coach that I know for emotion. And she's like the lady on billions. And she coaches, and Pete hates this story, but I love it. So what she does is, because I asked her, what's the most common question you get asked? And she said, go ahead and ask me. She said, I guarantee you're going to ask me the most common. question. And I said, all right, I will. Why does losing a little hurt more than winning a lot?

You know, put it in numbers. If I lose 10,000, but I make 100,000, the 100,000 felt great, Pedroos, but the 10,000 is what I'm going to focus on. I just can't get it out of my head. That's a really important. And she's, and, you know, another Armenian, um, uh, Bilzerian said the same thing. He said, I damn near quit poker. I think he did say quit, but I think he's back. But he said, because I can't stand losing. I lose $5,000.000 I'm freaking pulling my hair out. And so I asked her that question then. Why does losing hurt more than winning wins?

And she said, okay, John, it's like this. You're a wolf. You're the alpha. You're in Yellowstone and you take down an elk. You freaking nail it from behind. You freaking, you know, go for the jugular. You kill that elk. You eat first.

And everybody from that pack comes and they all sniff you. and, you know, they're licking your fur and things like that. They're saying, great job, Bedros, great job. You're the man. And that feels great. That wolf, that alpha, that's what he lives for. But then that alpha goes somewhere where he's not supposed to be. He's scouting for another elk, but all of a sudden he smells another pack that has marked that turf.

That's why losing hurts more than winning feels good, because that's got to make an imprint in his brain that he knows, I can't screw up. I can't be back here and be away from my pack in somebody else's territory or I'll be dead next time. Because if I make this mistake too many times I'm dead, I can take down elk all my life. And, you know, that's going to feel great. But you screw up on that one thing and you keep doing it, you'll lose. Yeah, yeah. Sooner or later, it's going to bite you. Yes, really.

Yeah. So I'm curious. Let's hear your morning routines because I love talking about morning routines. Because I believe you win the morning, you win the day. you win the day, you win the week. So why don't you start, John? Sure. What time do you wake up?

I wake up at, if I'm in Chicago, I wake up at 5.30. Get up, brush my teeth, literally just throw water on my face, drive into the office. We have a workout facility right there at the same building next door to where my office is. And I go in there and I work out until about from, let's say, 6 o'clock till about 8 o'clock. So you're fasted. You haven't eaten breakfast yet. Haven't eaten anything. I'm just on coffee. I'm just down in coffee. The closer is fuel.

I'm on the stair climber. I'm on the treadmill. And then I get the weights done at the end. And I wasn't doing the weights for a lot of years. And then Pete, who doesn't do as much cardio as me, told me you've got to do more weights. So then I started doing the weights. Now I feel better. I have more.

The core is stronger and all the rest. So that's the start of my day. And while I'm on the treadmill, I'm watching C. NBC. I'm watching Bloomberg. I'm listening to Bloomberg. And I'm sitting there, either putting out a tweet about stocks that I'm trading already in the pre-market. So in other words, I'm already set up. And if I'm in New York, I've already made trades probably for the first hour before the market opened. I've already made trades. Then I go up and work out and then get ready just before the market opens at 9.30 Eastern.

And what is breakfast? After your workout, I'm guessing you eat something. Yep. Usually egg white omelet with whatever I want in it. But, you know, whether it's bacon, whether it's avocado, cheese, anything in it, but it's almost always egg white omelet. Gotcha. Pete, what about you? What's your morning routine? Yeah, I wake up a little bit four or five. I love to get into the gym early, but I do eat a little something beforehand. I always take a protein shake. I always take all my vitamins for the day, and then I eat a couple of protein bars. I get into the gym. It's always cardio first because I hate it. I absolutely hate cardio with a passion. By the way, I'm going to stop you right there. Guys and gals, listen up. Listen up. We've

I've heard this numerous times over and over again. You do the thing that you hate and despise the most. Right? Because if you make a list of three things to do and the thing you hate the most is number three, you're going to avoid number one and two just to never get to that. Put the thing you hate most at the top and dominate through it. I love that. I absolutely hate it.

I do 20 minutes of that. Then I'll do about 45 minutes of weights and then I'll do some stretching. And then I get the heck out of it. I'm done. I've been watching TV while I'm doing the cardio, but the rest of it. And I don't rest, Bedros. I'm sure, I don't know how you and John do it, but I super set everything, no matter what I'm doing. Because I don't understand why I'm going to wait three minutes before my next set.

I'd rather just keep moving around the weight room and I'm doing four or five different, you know, exercises. And I just continue to move around. And I try to do four of each. So it's, you know, 20 different, you know, rounds or whatever. Once I get out of there, I love getting in front of the computer screens. Now I'm making my coffee that John's talking about. Now it's coffee time for me. So I got the coffee and my wife is a wonderful lady who...

So you work out without coffee. Oh, absolutely. Yeah, I don't... The coffee doesn't start until I get back home. So I'm doing the protein, man. I'm doing the protein drinks and all that kind of stuff. But yeah, you know, and the endorphins are going. Sure.

And my body's ready to go. My brain's ready to think. And so I feel really fantastic. The days where I've missed workouts, where I've gotten up later than I should have, so I'm not going to be able to make it, I'm frustrated all day. I'm angry at myself for doing that. So my goal is... basically seven days a week to get into the gym.

Good for you. So I'm guessing you guys were successful that everything you did ever since you were kids, right? It just makes sense that you would just be tremendous athletes and now you understand how money moves and how to trade it. Is that how life started for you guys? I won't say we were speaking for myself.

I won't say I was a success at everything. But I did know that there were some things. I knew I was a leader, Pedro. Because I can't remember from being a Cub Scout on that I wasn't the captain of something, you know, the leader of the, whether it's Cub Scouts, whether it's football, whether it's ski team, because we're skiers, whether it was track. I mean, we both did all that. And by the way, we got bust into a mostly African American high school. So we went to high school with Prince and those guys in Minneapolis

because I grew up, we grew up in San Francisco. My dad took the job chief of surgery in Minneapolis. And we were all going to, you know, regular, it was in the city, but it was like a white suburban high school. Everybody there, you know, there were probably 30 black kids at the junior high. But then they started busing us to the African American or black high school. And now we're in that minority. You're the minority. Now, we're the. How was that experience?

Oh, that was different. Now I know how you felt because of that. Because, but it, just like with your dad, it's one of the best. gifts our dad ever gave us because he said, look, guys, obviously I can send you to a private school. Our dad was a very successful transplant surgery. But he said, give this a shot. If you can make it here, it's a magnet school. They got great teachers. If you can make it here, this will serve you better in life than just going there with all those, you know, more or less, you know, snotty, rich kids or whatever. So we said, let's give it a shot. I was six years older than Pete,

so I went there. There was only one other white guy on the football team when I got there. They gave me my, they gave you, you know, your helmet, your shoes, shoulder pads, socks, jocks, t-shirt. They gave you all that at the cage when you checked in. They took everything but my helmet, my spikes and my shoulder pads.

They being the other football players, gotcha. Took it as I walked through to get to my locker. So I'm sitting there by my locker and I'm just going, well, this sucks. They took all my stuff. Is this like the day one kind of day? Yeah, and I'm a sophomore in high school.

Welcome to Central High. And I just moved to an all black high. I didn't shower for the first two weeks, Davey. Oh, sure. No, I mean, screw that. I wasn't going to go in the shower with these guys. But then finally, I broke through, and those are some of my best friends to this day. I mean, some fabulous guys.

But they also were, you know, being really tough because here's a white guy coming into our locker room. What F is he doing here? You know what I mean? They didn't appreciate it because it was their clique. Did you win their respect on the field or did you just win them over in general over time? I think on the field. Because when you, you know, I know you're a big fan of seals and military folks, as we both are. And I think there's something for being out there and bleeding with people. Being out there and knowing that they did the same stuff you did. So whether it's going out into the ocean when it's freezing cold or whether it's, you know, running when it's 105 degrees and doing wind sprints, you know, and everybody's just dripping with sweat and everything.

Those guys are your brothers after you've done that with them. Yeah. Yeah, I hate that something. Ain't that something. So I want to let you guys know, and this isn't me sucking up or kissing up to you. This is a fact. All right. Because I spend time watching your show. You do realize you guys have a very specific gift. And it's not, I don't think, the gift of options trading. Would you say there's others who can trade options as good as you can probably, right? The gift that I've seen that you guys have really well

is you know how to hold attention of society now who has very short attention spans, number one, and two, you've got the gift of making it easy to understand. And what I haven't understood in 45 years, you explained options to me in what took three minutes. And I see you do that over, and over and over again. And I'm curious, is that what happens here? Follow the smart money. Yep.

Recent book. Tell me about this. Well, you know, it's sort of defines, we really wanted people to understand the world of options in a better way than they do. And I think that since we started on CNBC back in 2007, one of the things, the goals was, you know, early on was keep it simple, keep it simple. Try to make sure that people really can understand. So without trying to be, you know, look like the guy from Harvard who understands this, that and the other, we wanted to bring it down so that people could understand something that is very complex, really, when you look at it. And so one of the things about our book is we want to teach people how to do that. How do you understand how they're priced? What all these Greeks mean when you're talking about the pricing of

these options and all that. And I think in our book, I think we managed to do a pretty good job of simplifying, not oversimplifying, but simplifying what the world is of derivatives, of the options world that we're in. And so my goal since day one with CNBC was, I want people to understand what Warren Buffett's doing because he trades a lot of options, what icons doing, because he trades a lot of options. Everybody thought that options are just for these crazy guys in Chicago and maybe some of the guys on the P Coast in San Francisco and some of the other exchanges. The reality is some of the biggest, smartest, and quite frankly, guys, over the age of 70 who manage billions and billions of dollars, Pedro's, these guys all use

options. And it's amazing, but Warren Buffett probably uses them far more than everybody would ever understand. And yet he's this conservative old man for Omaha, Nebraska and all the rest of that. He's not all shucks. This guy's genius who's figured out the options world. That's how oftentimes these guys can get themselves into position ahead of time, because until they own a certain percentage of the stock, they don't have to file that they've been buying it. Once you get to a certain level, now you've got to file and everybody finds out, well, if you're on the options world, they don't have to file that until whenever they want to. Which goes back to the story, the Disney story that you just said. Yeah, yeah, absolutely. Because if you know somebody big is

buying up a stock, like when Warren Buffett was buying Apple. Now, we didn't know. We knew somebody big was buying it because, again, it's very anonymous. Even at your level, hold on, I got to stop it. Even at your level, you don't know. Even at our level. But some people you sniff out. Some people you do sniff out a little bit. Well, we can guess. I mean, there's no way we...

But you would never go on TV and say like, hey, I think it's so-and-so-bying so. Or would you? Probably not. Probably not. But here's one... I'll give you two examples. One example of how you could. And that is, for instance, Carl Econ. Yeah.

Carl Econ had this big fight for herbal life. Ackman, this very smart investor, was short herbal life. First of all, he was dumb, though, to come on TV. and tell us and the whole world that he's short this stock. Because when you're shorting a stock, that means you're betting that it's going to go down. You have sold it with the idea that I want to buy it back at a cheaper price. And as soon as he said he sold it, the stock fell like a rock. Because people at home and everything are going, oh my God.

You know, I better to get out of this thing. So, Carl, Icom. Shouldn't he be smarter than that? He should have. And I'll tell you that, like he said, that 70-year-old dude taught him a lesson, or 80, Carl Icon stepped in and said, I think he's dead wrong. I talked to the company. I think this company should be more like a hundred bucks a share. He didn't cover it when it fell to 27 from 50 down to 27. So I'm buying it here at 27. And then the stock takes off to the upside.

Now, the very next day, we started to see huge options in herbal life. We knew it wasn't Carl. The reason we knew is when people are that big bedros, they don't trade on the exchanges. They pick up a telephone and say, I want to buy these options. You sell them to me over the counter. I don't care what you got to do to hedge yourself. So what we do is we see Credit Swiss, Deutsche Bank, Barclays, Goldman Sachs, whomever is buying up tons of these calls. Why? Because they sold them to Carl. And now they're covering their exposure. So in a situation like that, we know in all likelihood who is buying those options. In the example with Buffett, Buffett and Apple, he was buying the crap out of Apple when it was $140 stock.

He was just buying it. We didn't know who it was. But we would see options every couple days, all of a big slug of options go by and you go, well, it's got to be some huge hedge fund because they're buying hundreds of millions of dollars. And is that an indicator for the rest of us to go, then maybe we should buy two? Yeah. Depending on, yeah. Exactly.

There's a book about that. But so that's what this is, though. We wrote the book because what we do is we have algorithms that follow that kind of activity. It's not John and Pete, in our opinions, it's really black and white. We just say if there's big option buying, big blocks of stock, options, futures, if there's big buying of institutional size. In other words, we don't care about John buying 20 contracts. We care about somebody who just bought 20,000 contracts, you know, 100 times as big as John.

I care about that. That's probably a hedge fund who probably has somebody at every conference sitting there. As soon as they hear something, they're texting their boss about what they're hearing at the conference. Everybody else is waiting for that story to get written before they can even see it. But the smart money has commission dollars that they can pay to their brokers. That's not insider trading. They've got people at those conferences, and they're buying alternative data and so forth so they can determine what's the web traffic to Netflix like?

How many people are downloading the Uber app? Is it people deleting the Lyft app or are they downloading? That's the alternative data you're talking about. Those are indicators of the success or failure. Credit card usage to do this, that, and the other, whatever it might be. So you just have a machine, follow that, and then tell us, and those are the ones, we really are coattailers or surfers. Sure.

I mean, if you wanted to say, coattail, that means, you know, you're getting on the coattails of a big investor. Surfers sit out there in the waves and they're just waiting and waiting, and all of a sudden the wave starts picking up. Now I start paddling. Sure.

Because the waves picking up and I know if I paddle fast enough, I can get on this wave. That's what we do with smart money. Speak going right back to your gift of how easily you can expect something. Seriously, you know that's a gift, right? Like the ability to take something complex and dilute it to simplicity is a gift.

So that said, I'm going to ask you two more questions. The first is a cop, a firefighter, a teacher with their income, their salary, should they be trading stocks and options or what should they be doing? Like, who's this for? Who should be doing this? I get it. I'm making millions of dollars. Maybe I should be doing it.

But what about someone who's starting off in business, making $100, $150,000 a year? as an entrepreneur, or maybe they're just, they have a job or a career making a hundred to 150,000 a year. Is this for them? Yeah, it is, because what options can do is, as we said at the top of the interview, you can limit your exposure. In other words, would I rather have $217,000 tied up owning a thousand shares of Facebook at 217? 217,000 is a condo in a lot of cities. Maybe not out here in L.A. Bedros, but in a lot of cities, that's a lot of cities, that's That's a condo. That's a garage, by the way, in New York City. I bet. But that's a condo. That's a lot of money tied up. If I can simulate that, if I'm that

fireman or that teacher, and I can simulate that same ownership with $15,000 or $20,000, I can spread that risk around. I can have a lot of lines in the water. So I'm not just sitting there with one big bet on Facebook. Instead, I've got 10, 12 different smaller bets, but I still have big exposure to the good side. And if it doesn't work out, I've got limited downside because they can't come to you for more money with an option. As long as you're buying it, you've put on all the risk that you're going to put on. And the knowledge, I think, is the key because the fact that, you know, it gives you leverage. It's something that we'd all like to be able to have. And as John says, it defined your risk. You know exactly how much you have on the table. Or if you use them in another

way, you can hedge your positions. For somebody who does own stock and they're a little concerned, markets are all over the place, even as we are sitting here today. I mean, what's going to happen in 2020? There seems like there's a lot of things going on in the world, right? So there are ways that you can use options just to hedge yourself. In other words, you're buying something that's going to be basically an insurance policy on your stock portfolio. So there's a lot of ways to use the options themselves, leverage being one, but protection

as another. Makes a lot of sense. And so in addition to the book, Follow the Smart Money. If our viewers, listeners, they want to learn more from you. you, get a little more guidance. Where do they go? They could go to marketrebellion.com. On that website, we've got distance learning, we call it, which is basically from their computer, Bedros, they could sit there and go through a tutorial that teaches them chapter by chapter about how to trade options. It tests them before they

go on to every chapter. Before it will let them go on, they must achieve a certain score. Because We don't just want somebody to give us money and then fail. We want them to know that I do know this and I know enough that I can move on to the next chapter. Now then they've built on that and they can build some success rather than just getting out there and saying, ah, I'm going to buy a bunch of these options. And if they lose, they lose. And then they probably never trade again. Right.

They have a bad taste in their mouth. They tell their friends, family, everyone around them. This didn't work for me. It's probably not going to work for you. Bad experience. You tell 10 people, good experience. It's not going to tell one. So marketrebellion.com.

Yes, sir. It's where they get education from you. They can then test on before they're allowed to swim freely in the waters. Right. Right. And then, of course, follow the smart money. Guys, thank you so much for spending time with us. Thanks, Pedro.

Appreciate you guys. I appreciate you, brother. Thank you. Guys and gals, if you like this show, and I know you did, I just want to help you raise your awareness of making money, creating wealth, and leaving a legacy. Do me a favor. Take a screenshot.

Tag myself, tag Pete, tag John. And, of course, don't forget to tell your mama. We'll see you later.