Money Rehab with Nicole Lapin - This Trader Can Make $20K+ In One Day. Here's How.

Episode Date: January 8, 2024

Nicole has always opted for slow-and-steady investing versus hyped-up, get-rich-quick trading. But, there are trading strategies that are more calculated, and can almost act as an insurance policy against risk of losses. To give us the masterclass on these strategies and more is investing expert Dominique Broadway. All investment and trading strategies involve risk of loss. The content you hear on this podcast is for entertainment and education purposes only and does not constitute financial advice by our hosts or by Money News Network.   Originally aired 3/30/23

I love hosting on Airbnb. It's a great way to bring in some extra cash. But I totally get it that it might sound overwhelming to start, or even too complicated, if, say, you want to put your summer home in Maine on Airbnb, but you live full-time in San Francisco and you can't go to Maine every time you need to change sheets for your guests or something like that. If thoughts like these have been holding you back, I have great news for you. Airbnb has launched a co-host network, which is a network of high quality local co-hosts with Airbnb experience that can take care of your home and your guests. Co-hosts can do what you don't have time for, like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you.

I always want to line up a reservation for my house when I'm traveling for work, but sometimes I just don't get around to it because getting ready to travel always feels like a scramble, so I don't end up making time to make my house look guest-friendly. I guess that's the best way to put it. But I'm matching with a co-host so I can still make that extra cash while also making it easy on myself. Find a co-host at airbnb.com slash host. One of the most stressful periods of my life was when I was in credit card debt. I got to a point where I just knew that I had to get it under control for my financial future and also for my mental health. We've all hit a point where we've realized it was time to make some serious money moves. So take control of your finances by using a Chime checking account with features like no

maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct deposit. Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can overdraft up to $200 with no fees. If you're an OG listener, you know about my infamous $35 overdraft fee that I got from buying a $7 latte and how I am still very fired up about it. If I had Chime back then, that wouldn't even be a story. Make your fall finances a little greener by working toward your financial goals with Chime. Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN. Chime feels like progress. Banking services and debit card provided by the Bancorp Bank N.A. or Stride Bank N.A. Members FDIC. SpotMe eligibility requirements and overdraft limits

apply. Boosts are available to eligible Chime members enrolled in SpotMe and are subject to monthly limits. Terms and conditions apply. Go to Chime.com slash disclosures for details. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. There are a few money moves I caution against. Crypto, which I have warned against from the beginning, signing up for overdraft protection, and trading, to name a few. Yes, shiny, overhyped trading is far riskier than slow, steady, boring investing, which is why I have always been team investing. But there are trading strategies that are more calculated and can almost act as an insurance policy against risk of losses. Typically, these strategies won't be the ones

you see advertised by finfluencers. I can't believe that's a thing on TikTok. Most of those guys, and yes, I do mean guys, will try and sell you some get-rich-quick scheme that ends up being a pump-and-dump scheme. But not our Dominique Broadway. Dominique is an investing pro and my personal favorite expert in the advanced investing and trading space. And that is why I approached her about having a podcast on my network. It's called We Have Options, and it's all about trading stock options. And lucky us, I have her on the show today to talk all about the topic. Let's get started. all about the topic. Let's get started. Dominique Broadway. Hey, welcome to Money Rehab.

Thank you for having me. I'm so excited to be here. There's a lot of rehabs you can be in. Yeah, that's right. Yeah, there sure is. And you help people with advanced investing rehab. Thank you so much. You are just amazing. I would like to take a moment to praise you. It's one of my favorite activities. So let me do that for you. You left your big, amazing job advising the 1% to help the 99% get richer and build their own wealth. So honestly, I bow down to you. I bow down to you since the moment we met pre kids, by the way. Yes. Oh, the good old days. But your commitment to demystifying finance is incredible. It's one of the reasons I've wanted to work with you for years and years. And now we are your amazing podcast on our network. Money News Network is called We Have Options. It's incredible. If you haven't listened to the show,

network is called We Have Options. It's incredible. If you haven't listened to the show, we are linking it in the show notes. So please check it out. And it is actually an area that is just not in my wheelhouse. I don't fuck with options. Honestly, I stick to, as you know, index funds and chilling. But I really would love to dig into the concept. So first, can you help explain what you're actually buying when you're buying a stock option and how it's different from just buying a stock outright? Yes. So options are just absolutely amazing. I just wanted to say, right, they're just such a really cool financial instrument that allows you to control hundreds of shares of stock without actually owning the stock. And so that's the difference, right? So when you're purchasing the stock, that stock represents a

share of ownership in that company, right? So Apple, GameStop, Google, whoever it is, like when you're investing into that company or buying that share, it represents a share of ownership in that company, right? So Apple, GameStop, Google, whoever it is, like when you're investing into that company or buying that share, it represents a share of ownership in that company of a vested interest in that company. And you're typically planning a lot of times to buy and hold it over time unless you're a trader and maybe you're buying and selling it throughout the day. When you purchase an option, you are actually purchasing a contract, right? And this contract gives you the right to buy or sell that stock at an agreed upon price by a certain date, certain time, et cetera, et cetera. And that's what it is. So you're buying contracts that give you the ability to control, but you're not actually buying the stock. Does that make sense? It does make sense. So there are two kinds of

options, right? And sometimes I forget. I've given myself little mnemonic devices, but I bet yours are better. The calls and puts. Yes. So we have our calls and our puts. And I never forget when I was studying for my series seven, which actually took me a few times to pass. Happens to the best of us. I would sit in the test and I'd be like, call up, put down, call up, put down.

Literally, I was just saying this in my mind. So there's calls and there's puts. So if I am anticipating the price of the stock to go up, I purchase calls. If I'm anticipating the price of the stock to go down, I purchase puts. And what I use to just remember, call up, put down. And that's pretty easy to, you know, kind of help you remember like which direction you're anticipating the stock to go. So call up, if you think a stock is going to go up, you're buying the right to buy it or sell it up. So there's two ways, right? So example, I purchased options on GameStop because I was anticipating GameStop's stock to go up because of their earnings.

Right. So when I purchased the options for GameStop, they may I think they were trading around seventeen dollars a share. OK, now I purchased options on GameStop that these options only cost me like a dollar. Okay. So instead of paying $17 to own the shares, I paid a dollar to buy the options. So as anticipated, GameStop's stock went up actually way more than I thought. It went up 52%. So it went from trading at $17, I think, to over 24 bucks. That also caused my option contract to go from $1.25 or so to $8. Now, at this time, I have two options. I can sell my option contract that I originally bought for a dollar and sell it at $8, right? Or I can say, wow, this did really great.

I want to own these shares for a long time or purchase them. You can exercise the option and exercise your right to purchase the option at whatever the original strike price was. So when I purchased the GameStop options, they were trading around $17, remember? And the strike price that I got, it was like $17.50. But now GameStop is trading, I think around like 24, 25 bucks. This is giving me the right to go and buy however many shares I want at $17. So now I'm buying GameStop shares that are currently at $25. I can buy them for 17. So you said the strike price in your explanation. Can you just introduce this idea of what the strike price is and how to think about that? Yes. I like to think of the strike price as this is the number

that I want the stock to go to and hit and go above if it's a call or hit and go below if it's a put. And this strike price, if you decide to exercise your options, which I will say in this case, I did not. I was like, I don't really want to own GameStop. And I just want to take these profits and I don't want to purchase the shares because for me to purchase, I would be spending, let's see, 17 times 20 times 2000. Oh.

Yeah. So let's just do 17. That would be $34,000 to purchase them. So hold on. So a contract has how many? Exactly. So one option contract equals 100 shares. Okay. I didn't know that. If I buy 20 contracts, that gives me the ability to control 2000 shares. So example, I invested, let's just to give you the math, I think it was like $1.25, right? So like $1.25 times 2,000. So I invested 2,500.

And then it went from that to, I think it was like 850, 17,000. So my $2,500 investment turned into $17,000 overnight. So that's how I make money trading on a daily basis. Damn, okay. But I could have bought more, right? I could have bought more. I could have bought 30, 40, 50, 60, 100 contracts, which is often what I do. But I'd only purchased 20 because I was confident, but not 100% confident that it was going to go up. But that's still a great profit for putting a trade in the evening,

wake up in the morning, the market opens at 9.30 a.m. Eastern Standard Time. And I think I was out by like 9.32, right? And so then you just go on about your day. So you have, you know, a couple options, but there's sometimes when I purchase options where I'm like, hey, I like Apple. I love Apple stock. I'm just trying to hoard all of Apple stock. Sometimes I'm like, instead of just trading the option, I may exercise it and purchase the shares at this lower price. But if you exercised the option for GameStop and you bought it at $17.50 or whatever your strike price was, and it was trading at $23 or $24, bucks, then couldn't you have just sold the actual shares at a profit as well? Yes. You own them.

Basically you're getting a discount for what everybody else is paying for them at that moment because you paid for the right to get that discount. Yep. And so you can exercise, but let's say for a lot of people, they don't have a lot of money, right? They don't have the money to purchase the 2000 shares, right? $34,000 is a lot of money, right? And so that's also why I love options. And you have options with options, where if you want to say, hey, I only want to invest the $2,500. And then I'm going to take this, you know, $17,000 gain and call it a day and not have to put up any extra money. Or you can say, hey, I'm going to invest $2,500, right, to buy the right. And then I'm still going to exercise and buy the options. Now, that's something that you can do if you have, let's say, a bigger pot of money to work with. But 99% of the students that I work with, they're not just tossing around $50, $60, $70K. They're looking for investments that are $100, $200, $300. And then that allows them the ability

to start building up their portfolios to do bigger trades. But yeah, you have a lot of options with options. Yeah, you do. So puts, can we do put down? Yes. So I'll give you an example with a put meta, right? This is a trade I did a few months ago. They were releasing their earnings. I had heard that people are spending less on advertising. And so because of that, you know, they're laying people off and things of that nature. But big thing is their sales were down drastically. So I'm like, okay, their earnings are coming out with all this information I'm hearing. It's a very high probability that their stock is going to fall, right? I bought puts on Meta. So I am anticipating that Meta's stock price is going

to fall. So let's say if I paid $300 per contract, right, for puts, Meta's stock price did end up falling. It fell like a lot, you know, the stock price fell, but the value of my put went up. So I may have paid $3 per meta share for option, right? And now it may be like nine, 10 bucks that ended up making about $26,000 for the day. So that's an example. So one thing you also want to keep in mind with options, because people get really confused with puts. And one of my favorite things is when my students make money with puts before they make money with calls, because we all want stuff to go up in value. That's how we're taught. We don't want anything to go down. But if you can become neutral to the markets and you know how to make money when the market goes up or down,

now the possibilities are endless. That's why most people, they're scared of the markets and you know how to make money when the market goes up or down, now the possibilities are endless. That's why most people, they're scared of the markets or they freak out when the markets fall because they don't know how to make money when it goes down. So if you know how to make money when it goes up or down, you're good to go, right? You always know how to profit in the market. And that happens if your prediction is right. If your prediction is right. Now there's times, obviously, when we are not right. There's a couple of things you can do to protect yourself for when you're not right. One of my first things I tell people to do is to follow the 5% rule. Don't ever invest more than 5% of the money you have, not of your whole account value, but the money you have sitting in cash into one trade if you're

limiting and saying okay i'm only gonna only do a small percentage even if you lose that five percent it's not gonna blow up your account yep you get what i'm saying now when people mess up they're like i have two thousand dollars in my account but the whole two thousand dollars in this trade and then the trade doesn't go their way and now they're, they have nothing. So exactly. Literally. So like I have in my Schwab account right now, here's where it is. I have $1,440 and 49 cents. Okay. Okay. So yeah. So if you took 5%, that would be about 70 bucks. There are a lot of things that you can actually trade for 70 bucks, but hold on. I clicked on the options part and my account and it says that I'm not approved for options. You have to apply. Tell me more.

Actually, we have a episode on we have options that talks about how to apply and how you can get approved. You do need to apply. That's the first step. So you have to apply for option trading. Now, I will say this. Applying is not like they don't pull your credit. It's literally just like asking you questions, more like a risk tolerance type of thing. Now, if you start filling out this questionnaire and you're like, I don't have no money, I don't make no money. I am super scared

of investing. They are going to decline you. Right. Okay. So you have to come off as a educated investor and as someone who understands the risk that they're facing. That's all I can say. But listen to the episode for more. Yes. Go to We Have Options to learn more about the internet. That's right. That's right. You're going to get the cheat code. Okay. So being agnostic to the market is so, so important in general to try to take the emotion out, right? And say like, if you can get intel just by reading everything that's out there about a company or just having an educated guess that something's going to go down, then you can profit from it going down too. But I can short sell. So what's the difference between getting a put and short selling?

It's very complex. Can I just say, don't do this unless you really, really know what you're doing. Like, I don't even like talking about it. I'm just going to tell you real quick. And then we ain't gonna talk about it because we don't want anyone to be like, Ooh, I was short selling. But essentially short selling is when you are borrowing the shares from the brokerage and selling them right at a set price. And your goal is to buy them back. The problem with that is like the losses are unlimited. The loss potential is so insane. And that's another one of the things I do like about options too. You can easily see any platform that you're on. You can typically see your max profit. So your max profit may be

unlimited, right? But you also always know your max loss. The most that you can lose in a option trade, if it's the call side or the put side, is whatever you invested. That's it. So I always know exactly like, hey, even if this thing completely just goes a whole nother way, I know that this is the most that I'm going to lose. I'm not going to be subjected to a half a million dollar call from Robinhood, which is really important, right? If you're new. So that's another big thing. Yeah, but that's essentially what short selling is i do not recommend it um at all okay let's not talk about it look trading is riskier than what i talk about which is like long-term slow steady investing boring ass stuff especially for new investors right it can be a lot riskier you need to really know what's going on with the company, know what's going on with the sector. But you say you can also use stock options as

insurance to lower your risk, right? Yeah, you can. You can. So a lot of people also use options to what we call hedge the portfolio, right? So example, let's say if you have a buy and hold portfolio with like Apple stock, like I said, I love Apple stock, tons of Apple stock. So you have your Apple stock sitting in here and obviously you bought it, you're long Apple stock, meaning you're planning to hold it for years and years. You can actually go in and purchase puts on Apple as well, right? So you can buy what we call leaps. A leap is a option that has an expiration date of over a year. And so you can purchase like leaps or even shorter term options on your Apple stock. So if your Apple stock goes down, right, if you're only owning the stock, then your value is going down, right? Your portfolio is going down.

But remember, if Apple stock goes down, your puts go up, up. So that is how people hedge their portfolio. So that way you're literally always making money and protecting your accounts as well. So even like, oh man, my Apple stock is down, but my puts are up. So what could have been a $2,000 loss may actually end up being a $500 gain because of the offset or the losses lessened. And just to be clear, you said if you own Apple stock for the long run, you're long Apple stock. So in finance, the opposite of short is not tall. It's long. I never thought about it that way.

Hold on to your wallets. Money Rehab will be right back. Hold on to your wallets. Money Rehab will be right back. I love hosting on Airbnb. It's a great way to bring in some extra cash. But I totally get it that it might sound overwhelming to start or even too complicated if, say, you want to put your summer home in Maine on Airbnb, but you live full time in San Francisco and you can't go to Maine every time you need to change sheets for your guests or something like that. If thoughts like these have been holding you back, I have great news for you. Airbnb has launched a co-host network, which is a network of high quality local co-hosts with Airbnb experience that can take care of your home and your guests. Co-hosts can do what you don't have time for,

like managing your reservations, messaging your guests, giving support at the property, or even create your listing for you. I always want to line up a reservation for my house when I'm traveling for work, but sometimes I just don't get around to it because getting ready to travel always feels like a scramble, so I don't end up making time to make my house look guest-friendly. I guess that's the best way to put it. But I'm matching with a co-host, so I can still make that extra cash while also making it easy on myself. Find a co-host at Airbnb.com slash host. One of the most stressful periods of my life was when I was in credit card debt. I got to a point where I just knew that I had to get it under control for my financial future

and also for my mental health. We've all hit a point where we've realized it was time to make some serious money moves. So take control of your finances by using a time checking account with features like no maintenance fees, fee-free overdraft up to $200, or getting paid up to two days early with direct deposit. Learn more at Chime.com slash MNN. When you check out Chime, you'll see that you can overdraft up to $200 with no fees. If you're an OG listener, you know about my infamous $35 overdraft fee that I got from buying a $7 latte and how I am still very fired up about it. If I had Chime back then, that wouldn't even be a story. Make your fall finances a little greener by working toward your financial goals with Chime.

Open your account in just two minutes at Chime.com slash MNN. That's Chime.com slash MNN. Chime. Feels like progress. Banking services and debit card provided by the Bancorp Bank N.A. or Stride Bank N.A. And now for some more money rehab. Go to chime.com slash disclosures for details. And now for some more money rehab. So I was going in and I was playing with buying individual stocks, which was like exciting for me because my stuff is so, so boring. I get it. Like everything, by the way, should be boring.

You want to have fun, like go on Tinder, go to the club. I want it to be the most boring possible, but I went in and I was like, okay. But then I looked on the bottom of my order type, which normally I just put a market order, honestly. But then I was like, limit, stop, stop, limit. Yep. Those are my other options when it gets sexy. And so I needed to refresh my memory on what those were. I should have just called you. So can you tell us what limit orders do, stop orders do, and then stop limit orders do in all of this? Like if you're just buying a stock outright.

Yeah. So if you're just buying a stock outright, just really quickly for those that don't know, market order is like, just get me in the trade, whatever the current market prices I'm buying with when, whatever the price is at when I hit enter, right. Just the market price, whatever it's going for. The limit order is when you're saying, Hey, I only want my order to be executed at this price or better. So the example I always like to use is like, you know, some targets sell wine, right? So you go into target and you take it off the shelf. You're not negotiating the price. You're

just buying it, whatever price it is. That's a market order. Now, if you walk into Target and you're like, hey, I want this wine, but I'm only willing to pay $5 or less. If I can't get it for $5 or less, I don't want your little wine. And then Target's gonna be like, get out of here. We don't negotiate. But that's literally what it is. Or there are some of these plugins, right? Where they'll alert you when it's on sale. Yes. Like honey or something. Right. So it's kind of similar to that. You're like, hey, I only want to buy this wine, but when it goes on sale. Yep. And so that's literally what a limit order is. A limit order is you telling the market that I only want it at this price or better. If you, you can't give it to me at this price,

I don't want it. Right. So it's like, Hey, if you can't fill my order at $5 a share or better, then don't put me in the trade. That's literally what it is. And when you go into like stop limit orders, those are like order types to like protect your order. Right. So we do like stop losses and stop limit orders a lot with trading. And that says like, hey, you know, I am in this trade at this amount, but if it falls here, if it's $5 and this thing falls to four, get me out. I want out. I don't want to be in this. This is my stop price. And then I want you to get me out at this limit price. That's for selling. Yeah. But you can do a stop when you're

buying too. Yeah, I guess you could. I mean, essentially they're all the same, right? So if you're saying it's a stop order, a limit order, either way, if you, if the direction's up or down, whatever you're going, either way, you're still saying this price or better, right? Like this is my stock price where once the stock gets to whatever this stock price is, it triggers and turns it into a limit order. So it's like, hey, if it hits $20, then I want you to turn this into a limit order and get me out of this trade at $20.10 or $19.99. You can do that with your stop order if you're trying to prevent losses. Also, if you're taking profits, right, to make sure that it's taking profits at a certain price as well so you can kind of do it from both sides and you can do this with options

and stocks so limit is like let's go to the wine example the limit is like the maximum amount you would spend on something and then the stop is like if it hits 450 then buy me the wine yes the stop is like it triggers it and then the limit is like this is the maximum I want to spend this is the price like if it goes beyond five dollars like I'm out exactly so this is the max that I want to spend or receive back do you have a good way to remember those yeah I mean essentially it's market buying it right now I I don't care what the price is. Limit. I only want this price for better and I don't want it. Stop. Limit is like, oh my God, if it goes below this, get me out at this price. That's it.

And do you think you should always put in a limit when you're buying or selling? So it depends on what your end goal is. So anytime you're trading, you should have a story why you're doing it, why you're getting into it, what your plan is, and how long you want to be in it, right? So I always say if it's a trade, nine times out of 10 when I am trading, I am immediately setting a stop loss. So I may say, hey, I'm going to buy these calls or whatever shares of Apple, and I'm going to set a stop loss at blah, blah, blah, blah, blah. So because if it gets lower than this, I just want to get out because I don't have time to watch this trade, right? But I also can set, so certain platforms, especially with Weeble,

they're really good at it. You can put your order and you can put all three orders in at once. The order that opens the transaction, so that's your initial, hey, I'm buying this. action. So that's your initial, hey, I'm buying this. The stop loss, meaning if it falls below 10%, get me out. And you can also add a take profit. So with certain platforms like TD Ameritrade, I think Charles Schwab, and I know Webull for sure, you can literally put all three orders in, which can be really great with traders because you're like, this is the order that opens the position. Now I own it. And now I know that if it falls below 10%, it's going to automatically give me up or if it profits 60%, it's going to take me out. So that way you don't have to think about the trade. You could just put the trade in and go

about your day. For first time investors. Can we just footnote that and say like Robinhood is for trading really? Yeah. The biggest thing is just making sure that whatever company that you are going with supports whatever account type you need, right? Like my kids don't have accounts at Robinhood because they don't have children's accounts, right? Their accounts are elsewhere. Or if you want to open up a business, like if you want to trade or invest under a business entity, like you can't do that with Robinhood, but you can do that with Schwab or E-Trade or Webull. You know what I mean? You need to figure out like, what is your goal for this money that you're investing or trading with? And then you can determine what type of account

is it going to be? Retirement account, Roth? Because you can trade in a Roth IRA, right? A lot of people don't do that. I'm like, I tell people, if you can, if you are eligible to contribute to a Roth, trade in a Roth. That is tax free money. Like that's to me what the one of the best places to to trade, because even if you grow that account from a thousand dollars, a million dollars, it's all tax free. Right. But I think it's really important to make sure that whatever company you select has the financial instruments that you want to invest in or trade or even if even just invest and that they also have like the account type too. I'm glad that you brought taxes up because you know when you took your profit on the options that you just bought on GameStop for instance I think you said it was like 17 grand do you get taxed on that? Yeah you do get taxed on that but that's why it's also

really important to make sure that you have a really good tax professional on your team to make sure that you can reduce your taxable income. But technically, yes, it is subjected to capital gains taxes. Just to be clear. So short term capital gains is if you own something for less than a year, you're taxed at ordinary income. So that's like the amount that your salary would be taxed on. If you own something for longer than a year and you sell that, that's taxed at long-term capital gains, which is lower than short-term capital gains. Yep. Yep, for sure. And that short-term rate, as you said, is based on your ordinary income. So that varies, right? It varies based on what your ordinary income is. So that rate isn't just like a set rate. But that's why it is important to make sure too that you do have a tax professional,

you know, if you're investing or trading either way, just that can understand like all the financial moves that you're making and making sure that they are all aligning to support whatever your bigger financial goals are, you know, if it's buying a house or whatever it may be. Even if you're looking to buy an option, like your first option, let's say today, and you use Apple as an example, because you love Apple. There isn't just one call price and one put price out there, right? Can you talk about the pricing? Yeah. So the price that you're paying, you're not paying the share price, which is the price of the stock is trading at. You're actually paying what we call the premium price. So the premium price is made up of like a couple things, basically the intrinsic value and time value.

So basically the further out the expiration date is, the more the option is going to cost because you're buying more time. That's not something you have to calculate, but just so you know where they're coming from with this number. So when you're looking at your option chain and your option chain, if you open up any of these apps or websites or brokerage firms, whatever, the option chain is going to just show you, it's kind of like the menu. Okay. It's like, okay, you're looking at Apple. You click here, you got calls, you click here, you got puts,

got your expiration dates along the top. And then you're going to see the strike prices typically around somewhere along the left. And then you'll see all those premium prices. Those premium prices is a price that you're paying to control the shares of the stock. And also just keep in mind, like we talked about earlier, the premium price to determine how much you're actually paying, it's the premium price times 100 shares. So if you're buying one contract, it's as safe as a dollar. So it's a dollar times 100 shares. It's $100 to buy that contract. That's how the pricing works with options. Okay. And then when that time is up, right, you have three things that you could do. You could exercise the option, right? And buy

the shares. You could sell the option, or I guess you could do nothing, right? And let it expire. And then you just lose the premium you paid. Or just sell it at whatever it's currently trading at if it's expiration date. So like, let's say if the option is in the money, meaning it is over the strike price, right? But for whatever reason, you didn't exit the trade, the brokerage firm would just automatically sell it to whatever the price is currently at. But typically, most people aren't holding their options until expiration. Typically, you are getting out of it before it expires. So even like when I trade options, I'm buying them for a few weeks out. And then that gives me time.

So if for some reason the trade does not go in my favor, it gives me some time for it to turn in my favor. I've had some options take some pretty ugly falls and then a week later become beautifully profitable. I'm paid, though, for that extra time. And it's, you know, end up panning out. Those are a couple of different ways that you can kind of profit. But if you're trading them, you're typically going to be getting in and out way before the expiration date even years. OK, so you said you had some ugly turns.

We talked about your beautiful turns. But tell me about like a cautionary tale. Oh, so many. So I will say this. Most of my big losses, it's because I'm doing too damn much at once. I've had some trades where I put the trade in and typically what I do, put my trade in and add a stop loss immediately immediately I can't remember what company it was this is my daughter was young and I put the trade in and then she started crying she like pooped so I go I put my phone down change the diaper totally forget that I got into this trade oh my god I go back and I just like I happen to look at my phone and it's like, Oh, your trade is down like over 20%. I'm like, what? Wait, what? Totally forgot. Like mommy brain, like to the 20th power.

And I think I was down like 4k and I was like, what? Like, how the hell did I forget? How did I not have my stop loss? It was, it was very, I was like angry, but I was able to, you know, kind of wait it out. But I had it took like three weeks for it to rebound. It's like forever. It was like really random. So other things that have happened and this doesn't happen to me definitely doesn't happen to me now. But as an early trader, not knowing the news. Right. And so the news we one of the things that we have our students check is like a site every morning to see what news is coming out. And let's say if there's a day where like the Fed is increasing interest

rates or talking or the president's talking or something's going on in the economy, right? They're releasing unemployment numbers, blah, blah, blah, blah. And I didn't think about that. And then I'm in a trade that was profitable. And then the news comes out and then the market goes the other way. And I lose all my profits, which that has happened a couple times with thousands I'm like what the hell and that's the worst when your trade was profitable and now it's it's so what I've even had to tell my students and now I will say I don't lose much at all and that's only because I listen to the rules that I give my students. And those rules, I'll share them with you. And my students are like, I just listen to what you say.

One, the 5% rule. I'm not going to lose tons because I'm not investing more than 5% of that available cash. The other thing is making sure that I typically always add a stop loss to the trade. So if I'm adding this stop loss, I know that I'm only subjecting myself to lose X amount. That is key, right? Adding that stop loss that says, hey, if it gets to this amount, this is the most I'm willing to lose. Get me out the trade. I'm out. Those two things, in addition to checking the news every morning, that's another big thing that my students like, oh my God, I was in this trade and I forgot about the news. Very, very important. Between checking the news and looking for the trades and all the things should really only take like 15 minutes every morning, right? This stuff doesn't take long.

You probably spend more time on TikTok and Instagram, but it's just prioritizing and like, you know, making that time. But yeah, those are, yeah, I've had some stupid mistakes. You talked about the funky banking sector right now or the financial sector. You talked about the funky banking sector right now or the financial sector. There's so much news happening, obviously, with banks and collapses. And there's so much deja vu. You and I probably have nightmares about 2008.

Listen, I rarely do. It's so weird because that's when I got into the financial services industry. Economics 101, you know that bonds and interest rates have an inverse relationship. So the fact that Silicon Valley Bank was purchasing billions of dollars of 10-year bonds just blows my mind. And a lot of these purchases even happened over the summer when the Fed has been raising interest rates since last year, last February, I believe. So who would go buy something that you know the value of it is going to go down? I mean, that's just basic. And then when I saw that the second person in charge of Silicon Valley Bank was from Lehman Brothers, and he basically did a very similar thing there. And I'm like,

we have to start holding these people accountable. Tens of thousands of people lost their retirement because of Lehman Brothers. It ended up in a really, really bad situation. This could have happened again. Obviously, the FDIC came in and saved the day because they know this would have effed up the economy. You know, we would have tons of layoffs that week. And so it's just been really frustrating. I think what frustrates me so much is that we have a lot of people in charge that really don't care about the average American. And they're making big financial decisions that really help them win a lot of people in charge that really don't care about the average American and they're

making big financial decisions that really help them win a lot of times. And the people that end up getting affected the most are the people that work right at the tech companies that are banking on the fact that they're going to get paid every two weeks and now they can't get paid. You know, things like that. It's not affecting, it's affecting the CEOs, but not affecting them as much. Right. And so that's where I get really upset and seeing the people in charge. And then they were trying to blame the fact that Silicon Valley Bank prioritized diversity and culture as the reason why the bank failed. Like, oh, they were putting too much energy on adding diversity and culture to the bank. I'm like, this is just stupid

like listen if you know you messed up just like you messed up right yeah i mean because we know that there was a bunch of white dudes at the helm of 2008 yeah similar with the silicon valley bank it's it's the same it's the same dudes they're just older and it's like oh my gosh like and i'm not gonna say i could have got up in there and ran it better, but I definitely wouldn't have told anybody. I was going to say that you could have. You could have been the chief investment officer. Let's put all of our money into government bonds as interest rates are going up. Hello.

We learned this freshman year econ. Like, what are you doing? Fuck. Yeah. It's so important to keep in mind, people's motives intentions so you're not touching the financials right now not really i did i did buy some puts on a frb first republic bank um i did profit on that i kind of want to see what's going on i think that there's some more stuff gonna happen there's a bigger play here i don't know what it happen. There's a bigger play here. I don't know what it is, but there's a bigger play here.

And I'm not really touching the banking sector right now. They need to figure that out. Make sure my money's good, first of all. So I end all episodes with a tip listeners can take straight to the bank. I know you have all the tips. What is one, though, that's top of mind today that listeners can use? There's a lot going on in the world right now.

But over time, you know, if you're even an investor like Nicole, you like slow, steady, boring, dry, long, buy and hold. There is nothing wrong with that. There's a lot of wealth in buying and holding. So I know there's a lot going on right now in the world, but just don't be scared to invest. And this is also just a really good time to make sure that we are on top of our money, right? We've had these warnings before. So I would

say be on top of your money, know what it's doing, but don't be scared of the markets. Do something today that your future self will thank you for. So that's, that's my advice. I love you. Thanks, Mama. Thank you. You're the best. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Levoy. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehab at moneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me. And follow us on Instagram at moneynews and TikTok at moneynewsnetwork for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself,

which is the most important investment you can make.