Reply: 1.1.1
From: Waverly Bay
Hi Glenn
The idea of selling options for "some additional income" (as it is commonly advertised) is not new. I have not done the course myself but have seen the notes and spoken to a number of people who did attend.
From what i have seen and heard from others, PS advocates what is technically described as a "protected covered write" which at first glance looks like a dead winner for profits. Here's briefly how it works: 1) you buy the stock, 2) you buy a put option for protection against the fall in the stock 3) sell a call option against that stock for premium. PS course will set out a whole list of factors which will act as the "trigger" to do each of these steps and more importantly, which stock and option to buy/sell.
As the course participants will tell you - its not that easy in practice ! As Michael said, there's alot of work that needs to be done to perfect any trading strategy ! For example, if you buy and sell the options in periods of high volatility, mistimings can be costly. Stick in the transaction costs and this whole exercise can easily be property's version of a negative gear - without the capital growth
I have no doubt that the PS strategy will work BUT.... like all trading strategies... I strongly believe that psychology and money management is the key to success. From my experience, you can create the most complex trading charts, the trade with the best software and develop what you think are fool-proof entry/exit points.. - but unless you have good money management systems and the right trading psychology: you will lose. A simple trading psychology like cutting losses (rather than hoping for the losers to "come back" ) can take a life time to learn.
So beware of anybody that promises "you can make oodles and oodles of income from stocks/options" !
My suggestion for anyone who wants to get into this stock/options game as a means of earning some "additional income" is.. - get your hands on the following:
1) Market Wizards
2) New Market Wizards
3) Reminiscence of a stock operator
4) The Secret of Writing Options
5) Options manual from the ASX website: www.asx.com.au
The books are available from dymocks and will cost you around $100 total. If you are gong to learn anything about trading, you might as well learn first from some of the gurus who have done it successfully.. right? - hence books (1)-(3) above. Light reading, nothing technical - but insightful.
I'm sure the PS course is useful for some but if the cost is an issue, then only do the course if you are still in a haze after reading the above books and checking out a few nitty gritty "how to trade" type books (surf around in www.stockcentral.com.au).
Cheers
Waverly