There is a lot of money to make in the world of options trading, but you could also lose a ton of money. Sometimes, it feels like a flip of a coin.
I have traded options part-time for over two years and have learned much about this profession. That’s right; some people do this for a living.
I like keeping my options trading career as a small part of my passive income strategy. However, you can expand or contract your options income as you deem necessary.
Build Wealth Slowly 2
The best part of trading options is having the power to decide your own leverage, risk, and return on a daily basis. But why would one decide to trade options?
No risk, no reward. Most people are risk averse—they fear risk. The simple fact is that without risk, you cannot live the life of your dreams.
Robert Kiyosaki says it best, “Is it easier to save a million dollars or borrow a million dollars?” No one understands this statement better than me.
I got married at 25 and had my first child at 25. For years, I tried playing life safely. I went to work, drove old vehicles, and my wife cooked.
However, at age 38, I was in debt and struggled to give my wife and kids the nicer things. I didn’t understand how the American dream wasn’t working for me.
I wasn’t taking any risk. I thought my military paycheck (over $100,000 per year) would be enough to give me the life of my dreams—it wasn’t.
Selling Covered Calls vs. Renting Rooms
The minute I started taking some risks, like renting rooms and investing in dividends, my fortunes changed. At age 43, my wife and I are retired, and we should be millionaires in roughly 2-3 years.
The moral of my story is that I tried to play it safe, and the world ate me alive. But let’s put everything in terms of numbers.
The numbers of life. Life is a math game, plain and simple. Over the last five years, I learned that you need your passive income and net worth to grow at an annual pace of 10%.
That means if you made $100,000 in 2024, you’ll need to make $110,000 in 2025. I know this sounds wild, but it is the truth.
Our annual pay increased roughly 3% in my military job over my 24 years of service. That’s why my family started falling behind the power curve.
Retiring on Dividends 106
As your pay falls behind, you could fall into credit card debt. Instead of needing 10% annual pay increases, you must overcome 30% interest on debt. That is very scary.
The key to your finances is understanding that your job is just one way to earn money. You will need multiple streams of income if you are to succeed financially.
Let’s say I earn $100,000 in 2024. In 2025, my pay stays the same, but I get a roommate at $1,000 per month. My final income will be $112,000. For 2026, I would need to earn $123,200.
Making this amount of money may seem impossible, but this is where options trading comes into play. Options trading can help you generate out-sized returns on your invested capital.
The magic of options trading. Don’t start trading options until you have a clear goal in mind. Trading options puts you in control of your wealth creation or destruction.
Options Trading in Your 70s
The bigger pot of money you play, the bigger wins or losses you create. You will lose big if you jump into this world without a plan or purpose. Here’s how.
The magic of options trading is that no one will cap how much money you can make (or lose). Let’s look at our example from above.
From 2025 to 2026, I need to generate $13,776 in additional revenue to meet my annual goals. That’s roughly $1,200 per month. I can generate this amount by trading options if I have a big enough pot of money.
The key is that I have a monthly and annual goal before implementing an options strategy. I can now determine which option plays I can use from “The Options Playbook.”
Going into this world with a big pot of money and no plan is extremely dangerous. If you watch YouTube, people will convince you you can double your money with every trade.
Retiring on Dividends 105
Options Trading in your daily life. You can double your money very quickly but with great risk. But looking at our annual numbers, we can be happy with 10-20% returns.
How does trading options look as a part-time trader? It’s pretty straightforward if you have massive money in your options portfolio.
Let’s say you put $50,000 in your options portfolio. You can make one trade per month using covered calls or cash-secured puts to generate $1,200.
If you receive $0.50 per option, which equals $50 per contract, you would need to sell 24 covered calls to achieve $1,200.
To sell 24 covered calls, you would need to own 2400 shares of the underlying stock. Let’s say the stock is SoFi (SOFI) at $14.67 each. You would use $35,208 of your $50,000.
Options Trading in Your 60s
Now let’s look at the annual returns. If you achieved $1,200 per month, that would total $14,400. You divide that number into $50,000 to get the return for our entire options portfolio—28.8%.
Making life easier. The key to building wealth as a part-time options trader is reinvesting your earnings into high-yielding, much more passive dividend stocks.
You don’t want to keep growing your options trading portfolio because you will keep assuming more risk. It is much better to increase your passive income from dividends.
Let’s say you invest the $14,400 into a closed-end fund like PIMCO Dynamic Fund (PDI) that yields over 12%. At the end of year one, you would receive $144 in monthly dividends.
Tobacco Stocks vs. Mortgage REITs
By the end of year ten, you would be earning $1,440 in monthly dividend income. Now, you create 28% annual returns from options and reinvest that at 12% yields. You are becoming quite wealthy by taking these steps consistently.
This may all sound confusing because it is a lot to digest at once. I am giving you the game of life in a few paragraphs.
The goal of life is to make money in your sleep—that’s how you become the person you want to become. How do you make money in your sleep?
Conclusion. You must understand the creation of money to make money in your sleep eventually. Working for your boss is not the creation of money.
Earning $2,100 in Monthly Dividends
The only way to create money is to add value to the world. Adding value for profit usually involves providing a service or product.
The best way to create value for the average person is to rent a room. You are adding value to someone else and will receive income. You take this rental money and invest it at 12% to become rich.
Most people don’t want to rent a room. Therefore, options trading is the second most lucrative endeavor the average person can do without starting a business.
Trading Long Strangles vs. Money Market Funds
For the options market, you are adding value by providing liquidity to the system. The stock market needs the options market to help provide new money every day.
Trading options requires you to take extreme risks with your money—for extreme rewards. Few people can survive this onslaught of emotions as they watch their money evaporate or compound.
As a part-time options trader, you will need nerves of steel. However, it prepares you to take risks in the real world. Things that seem scary, like buying a second home, now seem less risky because you are an options trader.
Becoming a part-time options trader changed my life. I now can make money as I deem fit to my circumstances. I don’t need a job, business, or property. I just need my computer and a big bag of money. Life is about choices, and trading options is a big one. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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