Do we all dream of traveling the world while making money from our laptops? I know that was my dream for a long time. I am over the long road trips after touring extensively for the US government for 24 years.
However, the idea of becoming a digital nomad, even a US-based one, is still appealing. I got a taste of it last year when my wife and I traveled to Istanbul, Turkey, for three weeks.
While in Istanbul, I made $4,000 in options trading long strangles, which paid for the entire trip—not bad. It also got me thinking about options trading as a legitimate way to become a digital nomad (hint: it’s not).
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What is a digital nomad? A digital nomad is someone who can make money entirely from their laptop and an internet connection.
Although I am firmly rooted in Pensacola, Florida, I consider myself a digital nomad because I have enough passive income and digital side hustles to survive without a physical job.
The apparel of becoming a digital nomad is freedom of location. Ideally, you can pick up whenever you want and go. It does sound amazing from the outside looking in, doesn’t it?
However, even more important than freedom of location is freedom of finances. Once you have financial freedom, you can do whatever you want, whenever you want—that’s the actual goal.
Options trading to the rescue? But we are here to talk about options trading as a digital job for a digital nomad. Can someone depend on trading options to set them free from their location?
The Hunt for Baby Bonds
I do not want to depend on the options market to free me from anything. I consider options trading a nice luxury. However, the options market is completely random, and as such, it should not be your main financial resource.
That being said, options can play a nice-sized role in your escape from the rat race; it just shouldn’t be the main star. You can build a nice portfolio of stocks, bonds, savings, and income streams to allow you to be free—let’s take a look.
The magic of reinforcing income streams. As a digital nomad, I wouldn’t want to depend on the options market or a job as my main source of income.
This means that before I go traveling around the world with my amazing Samsung Galaxy Book 3 Pro 360 laptop, I want two things in my account: an emergency fund and a dividend portfolio.
To build a fully-funded emergency fund, you need 12 months of expenses. To build 12 months of expenses, you need to understand where you’ll be living.
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A fully funded emergency fund in San Diego, California, will be much more than one in Mobile, Alabama. For the sake of argument, let’s say my basic expenses total $3,000/month because I will be renting a room in Manhattan, Kansas, for the next two years.
I want at least $36,000 in my high-yield savings account before I start my journey. But wait, there’s more. Now that I have protected my basic needs, I still need cash flow. The goal of a fully funded emergency fund is to never use it.
Before I become a digital nomad, I want to earn at least $2,000 per month in dividends. I can build that type of revenue with a $240,000 high-yielding income investing portfolio.
Now, I need a reliable day job or side hustle: consulting, mentoring, coaching, or tutoring. I can also freelance, start a blog, or become a YouTuber.
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I want to start this particular income stream at least three to five years before getting on the road. The goal is to generate at least $2,000 per month from it.
Looking at the overall picture. I rent a room in Kansas and live for $3,000 per month. I have a $36,000 emergency fund, a $240,000 dividend portfolio that pays me $2,000 monthly, and a side hustle that generates $2,000 monthly.
I have $4,000 in cash flow to cover $3,000 in expenses; I am doing quite well. This is the ideal setup to start trading options.
Before trading options, I must create a specific reason and goal for our journey. “Making money” is not a reason to trade options because it will not keep you grounded in reality.
In this case, trading options can be my entertainment budget. I would like to reinvest my “extra” $1,000 back into the dividend portfolio, so options can be an excellent way to generate my “movies and beer” money.
Now that I have a reason, let’s decide how much entertainment money I need. I would say that $300 per month would be a reasonable amount.
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It’s essential to choose a number for my options trading output because it will determine what type of strategy I will employ.
Picking an options trading strategy. Aiming for $300 per month in options income is quite reasonable. I can employ the options wheel strategy to generate this type of income.
The options wheel strategy consists of selling covered calls and cash-secured puts in a rotating cycle. You can read about it in “The Options Wheel vs. Dividends.”
I use the rule of 40 to determine the size of my options trading portfolio. I simply multiply the monthly total you want by 40. In this case, I get $12,000.
Let’s run a quick sanity check on the numbers. I can sell one cash-secured put (strike price $13.50) on Rivian (RIVN), whose stock price is $14.40. The put will generate $62, and I need to hold $1,350 in cash.
To reach my monthly goal of $300, I would need to sell five cash-secured puts for a total of $6,750. I still have a lot of money in my portfolio to invest in money market funds or dividend stocks.
Do you see why trading options isn’t a good primary income stream? Let’s run the numbers if I want to earn $3,000 per month via the options wheel.
Grace & Passive Income
Using the rule of 40, I would need $120,000 in my options portfolio. To generate that type of income, I would need to sell 48 RIVN cash-secured puts.
However, I encounter liquidity issues once I get past ten puts or calls on smaller stocks. If I want to trade lots of options, I need to invest in bigger stocks like Apple (AAPL) and Tesla (TSLA) or index funds like the S&P 500 (SPY).
Apple currently trades for $228, so selling one cash-secured put (at $220) would require $22,000 and generate $310. To earn $3,000 per month with ten puts, I would need $220,000.
Back to reality. The options market is not where the average person wants to spend much time. It’s dangerous. The best way to prevent yourself from losing a lot of money is to avoid putting in a lot of money.
I don’t want $220,000 in my options account, do you? $12,000 sounds like a much more manageable number. I can safely generate $300 per month from selling cash-secured puts.
I Live Paycheck to Paycheck 4
Having the ability to trade options from anywhere is a great selling point. I can use my options money to exploit opportunities in the options market.
However, it’s best to stick to a tried-and-true options trading routine. I don’t need to do anything sexy. I like to have one put or one call out at a time.
If I take the same $12,000, I can generate $600 to $1,200 per month by trading long strangles, but I assume more risk. However, it’s nice to have the choice of approaches.
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Conclusion. Hopefully, I didn’t burst your bubble too much. Many people dream of living on the white sand beaches of Pensacola while trading options and making $10,000 per month.
To be completely honest, you can make $10,000 per month in options, but you will be nowhere near the beach. You will work full-time whenever the stock market is open and study at night. It would be a full-time job.
Even worse, you would be leveraged to your eyeballs. I assume that is not the life you want; it’s certainly not what I envision.
Instead, we can have the digital life of our dreams by combining current income from a side hustle, living below our means, having an emergency fund, and exploiting our dividend portfolio.
Trading options is just the cherry on top of an amazing sundae. We don’t want to add additional stress when we can avoid it by becoming financially savvy. Good Luck!
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