In February of 2019, I began again a quest I’d in 1998: trading stock derivatives. Specifically put option spreads.

I did it then and lost thousands of dollars in six months. It was devastating.

Reason I lost it? The bottom line is that I didn’t know enough. I didn’t know enough to do the things that can prevent losses.

I know better now. Know how to make trades that insure against enormous losses. And while the last year has not been without occasional losses, those losses are limited.

I first heard about doing this kind of work on 1979. I thought it sounded fun. It is fun.

How is it fun? While making some money, trading derivatives lets me study emotions. Mine and other folks.

Because I sell into fear. What happens is when a stock drops precipitously, I sell puts. Puts are instruments that permit the owner to require me to buy the stock.

And when there’s bad news of whatever variety, most people think the stock will drop forever

It won’t. I know that she average stock will vary no more than 5% in a given month. So I take advantage of fear.

But I learn about my own fears as well. Because sometimes a stock goes against me. And while the way I trade means that ultimately I’ll make money off it, that doesn’t mean I don’t get scared. Because we’re not only rational creatures. And every trader needs to learn to control their fears. And to have a system that takes into account when you’re wrong and works through those wrong times and controls the dumb actions we sometimes do when were afraid.

And ultimately life needs to be lived like that. We need a direction that guides our lives and contains our fearful reactions.