My Story
Why I Only Invest in the Stock Market With Long-Dated Options
I didn't start out trusting the stock market. I started out afraid of it, and for good reason.
Watching a crash up close
I watched the dot-com crash tear through my mom's portfolio. Money she had worked hard to save just kept shrinking, and there was nothing she could do about it except watch. Then 2008 came along and did it all over again.
So for years, I largely stayed out of the stock market. Not because I didn't understand that stocks grow over time, but because I'd seen what a crash does to real people. It isn't just the losses. It's the fear, and the decisions people make when they're afraid.
The real problem isn't the market. It's not knowing your worst case.
Most people who lose big in a crash don't lose because they owned bad companies. They lose because they had no idea how much they could lose, so when the market dropped, the pressure got unbearable and they sold near the bottom. Then they watched the market recover without them.
Traditional advice says to diversify and ride it out. But in a real crash, almost everything falls together, and "ride it out" is a lot easier to say than to do when your account is down by a third.
Getting back in, but only if I could do it safely
In 2010, I decided to get back into the market, but only on one condition: I had to know, before I invested, the most I could lose. I left medical school in my third year to invest full-time and figure out how.
The answer I landed on was long-dated options.
What long-dated options actually are
An option gives you the right to buy a stock at a set price for a set period of time. Long-dated options give you that right for a year or more. You pay for the option up front, and that payment is the most you can lose on it.
Here's a simple way to picture it. It's a lot like putting down a deposit to lock in today's price on a house. If the house goes up in value, you benefit from the rise. If it doesn't, the most you can lose is the deposit.
The version I use most is called a call debit spread. It caps how much you can make on the position, but it also lowers what you pay for it, and you know both your worst case and your best case before you ever place the trade.
Building a portfolio where the downside is small and known
The real power isn't in any one trade. It's in how the whole portfolio is put together. I keep most of the money in fixed income and put a smaller slice into long-dated options on dominant companies.
- If the market falls, the most I can lose is what's in that options slice, and I knew that number going in.
- If the market rises, that slice gives me a share of the upside that can be many times larger than what I put at risk.
That's what I call an asymmetric portfolio: a little at risk, much more to gain if the market rises. And you can set the balance wherever you're comfortable, more conservative or more aggressive.
What it changed for me
The biggest difference isn't the math. It's how it feels. When you already know your worst case, a market drop isn't an emergency. There's nothing to panic-sell. I don't watch the market all day, and the positions run for a year or more, so I only need to check in occasionally.
And when the market does fall, having most of the money in fixed income means I have cash ready to put to work, instead of wondering how much worse it's going to get.
Why I teach it
Since 2010, I've built a seven-figure portfolio this way, and I manage every dollar of it myself. I teach it because I think about my mom watching her savings shrink, and how different that would have felt if she had known her worst case before she invested.
If you've ever sold in a panic, sat in cash waiting for a crash that never came, or simply wondered how much you'd lose if the market dropped tomorrow, this approach was built for you.
