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When I
attended live seminar taught by Mr. Mike Coval, he told us if we treat
trading as a business, it will give us return like a business. If we
treat trading as a hobby, it will give us return like a hobby. I
determined to make trading my business, not my hobby. I work hard to make
myself knowledgeable about trading. It was hard at first, but I figure it
is hard at every thing from the beginning anyway.
I
believe in any business, we should include, but not limit to, the following
factors:
1. Knowledge
about the business.
2. Capital.
3. Management
Skill.
4. Products/Services
to sell.
5. Customers
to serve.
6. Worker
Comp. Insurance.
7. Fire
and Liability Insurance.
8. Salary
Expenses.
9. Rental
Expenses.
10.
Utility Expenses.
11.
Commute and/or Travel Expenses.
12.
Legal Issue.
Mr.
Robert T. Kiyosaki, the author of “Rich Dad Poor Dad” book, categories
four different quadrants for the work forces: E, S, B and I. E stands for Employee; S stands for
Self-employed or Small Business; B stands for Big Business and I stands
for Investor. I believe most of us started with the E quadrant. We can
stay at the E quadrant or move up depending on our goals and motives. I
was, at one time, offered the opportunity to move up to the E quadrant by
being a financial planner with a big financial firm. To be a successful
financial planner under their system, I have to manage my team, sell
insurance products, serve customers, travel a lot and pay
rental/utility/insurance expenses for my office. I figure I won’t have
time for my family doing that business. On the other hand, Investools
program gives me flexible schedule, shorter working hours and best of
all, I don’t have to sell products and serve customers. I know for sure I
will not be in the B quadrant simply because I am lazy. I don’t want to
prepare for all 12 items listed above. Pure and simple.
One of
the reasons I love this business so much is I only need items 1, 2 and 3
to run it. Items 1 and 2 are self explanatory. When I talk about
Management Skill in this business, I mean money management, emotion
control and trading discipline. I believe it is easier to manage myself
than to manage my employees or my team. Another reason I love this
business is the working hours, especially on the west coast. The market
closes at 1:00 P.M.
and I am off. At night, I spend about one hour reviewing my portfolio and
planning my next moves for the following day just in case the market does
not move in my direction. I monitor my positions on weekdays from 9:00 A.M. to 1:00 P.M. It is said the amateurs open
the market and the professionals close it. By no mean I imply I am a
professional. I still have a long way to go before I become a
professional trader. It is just with my trading style, the closing hour
is much more important than the opening one. Besides, I am busy with my
kids in the early morning. By the time I drop them off to their school
and come home, it is time to go to work. The timing is just right for me.
This
business does not have products to sell and customers to serve which I
personally think is a big plus, to me at least. By eliminating items 4
and 5, I save a lot of time and money in inventory and customer service.
I have no rental, utility and insurance expenses for my
store/office/warehouse. I don’t even have employees to worry about worker
comp. insurance and their salary. The best part is I can do my business
in the comfort of my own home. Hence eliminating commute and/or travel
expenses. The only possible legal issue here is if my broker goes bankrupt.
To minimize that risk, I pick a large online broker firm whose stock is
publicly traded in the NYSE. The 3rd week of the month is
usually the most exciting week for me because option expires on the 3rd
Friday; I call it my “payday.”
I am
often asked if I still trade while I am vacationing. When I am off, I
sell covered call against the stock I currently own. If the stock closes
above the strike price and I am called out, I make profit selling the
stock and the covered call. If I am not called out, the net cost of my
stock is reduced. Some traders prefer to set stop loss while they are
vacationing to protect their profit just in case the stock drops in
value. They are in the “defense” mode. That is not my style. I prefer
selling covered call. I guess I am in the “offense” mode. If I see a good
naked put opportunity, I conservatively sell the naked put way
out-of-the-money (OTM) and make sure I have enough capital to buy the
stock just in case it is put to me. Buying long call/put, selling short
call and spread trade of any kind are definitely out while I am
vacationing. Covered call and conservative naked put are the only
strategies I use during my vacation. I do not bring my computer with me
during my vacation because vacation is the time off for me and my family.
In fact, I do not even have a lap top computer, for now.
I
intend to make trading my business, not my busyness. I believe money
making process should be fun and relaxed. In my opinion, trading is
neither hard nor easy. It is just different. I consider the pluses and
minuses between trading and other “traditional” businesses and I pick
trading to be my business. So far, I haven’t regretted my decision. I
will wrap up this series in my next article “The Thought.”
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