Building Wealth: Combining Options Trading and Long-Term Investments Strategy

When I first started dabbling in the markets around 2007, I thought I could get rich by trading my AI models. Boy, was I wrong about that. I soon learned that doing less in the markets would build wealth sooner.

There’s a difference between being rich and wealthy. Being rich means having a sum of money, whereas wealth is money making you more money without lifting a finger. So, I shifted my focus to long-term investing, and the rest is history.

Then came the opportunities I couldn’t pass up. GameStop (GME) lured me back into the market a few years ago, and I made significant profits in just two days. The mania that these new traders had was irresistible.

This led me to be more active in my trading account, selling some laggards to free up trading capital. Since then, I’ve been trend trading technology stocks, frequently buying and selling the usual suspects like Nvidia and Microsoft. I’ve started to catalog these trades for Premium members here.

The reality is that buying and selling stocks is costly. It’s costly from a fee perspective, a time perspective, and a profitability perspective. I use Interactive Brokers with low commissions, but every time I buy or sell, I pay a small fee. Then there’s the time spent looking for profitable setups, and sometimes I lose money because a trade didn’t work out.

Despite the risks, these past few years have been very profitable for me. My new investment and wealth-building strategy is a combination of long-term investing and short-term options trading.

Buying stocks for short-term trading is what Boomers do, and I’m a Gen X’er. What do we do? We buy and sell options.

I’ve been learning more about trading options and have been selling a lot of premiums. I use the Wheel Strategy for stocks I want to own and have the cash to buy, but I still like to extract some premium over time.

Buying calls or puts on high-flying tech stocks like Nvidia, Meta, or Tesla is easier because your risk is capped at what you paid for the option. Things get a bit tricky when you start selling calls and options on those volatile stocks, but with prudent money management, you can make money in options more easily than in stocks.

I’m sold on options, and while I have a long way to go to become a master, I can see their short-term profit-making potential much more clearly than buying and holding stocks.

For the long-term side of things, I like diversification and market sectors. I much prefer to take my gains and plow them back into QQQ, IWM, or SPY rather than buying individual stocks. These ETFs are low fee and provide the diversification I need and want.

TL;dr

In summary, my new investment and wealth-building plan is simple yet effective:

Buy and sell options for the short term to generate cash flow.
Invest short-term gains into diversified ETFs for long-term growth.

By balancing short-term options trading with long-term investments in ETFs, I’ve found a strategy that suits my goals and risk tolerance. This approach allows me to capitalize on market opportunities while ensuring my wealth grows steadily over time.

TL;dr

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