Rule #1 Finance Blog

With Investor Phil Town

InvestED Ep. 167 – Options Basics

This week we’re back to burritos. We’ll talk a bit about Options from the viewpoints of the greats and give a bit of an introduction to next week’s discussion of Options. I remind Danielle that you need to walk before you can run, and she reminds me of her investing-based childhood. We’ll also delve into the different types of investing and the different types of investors.


In Episode 167 You’ll Learn:

Why are we talking about Options?

  • You can use options to protect the profit you’ve made from a company
  • Warren Buffett isn’t nimble enough to move in and out of companies the way smaller investors can

Three Investing styles:

  • A 20-year-old with a stable job investing in the index at 10% of their income
    • Comfortable retirement – You have to have a lot of time to make this work, but this is the style that is always pitched.
  • An individual with lots of time and doesn’t want to work forever; or an individual without much time or money.
    • Investing in wonderful companies when they go on sale will be the most beneficial.
  • A 55 yr old without enough money to ever retire
    • This person will need to be more aggressive and take more gambles.

Three Categories of Investing

  • The Generals – basic stock investing; investments where we have a disparity between price and value.
  • Controls – taking over a company; owning it; most of us don’t have the capital for this.
  • Special Situations or “Trades” – this is where options fit in.

Options Trade:

  • Allows us to take the profit we make from the company off the table and buy back into the company at a cheaper price.
  • Options on the index are essentially bets that the economy will improve; it is a form of speculation where 99% of people are losing money because of a lack of education on how to do it successfully.

Show Notes:

  • Phil and Danielle recommend:
    • “Investment Biker” by Jim Rogers

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On the InvestED podcast, Phil and his daughter Danielle shine a light on the successful investing strategies that gurus like Warren Buffett have used for 80 years. Listen in for a great stock market education on basics, learn how to invest on your own, and follow along with real-time examples and investing tips from week to week.

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