In today’s Issue:

  • I was taught the wrong thing too
  • All powerful tools are “dangerous”
  • AI, options and a classic investment strategy, combined

I didn’t learn much at university. Each night, the 2008 financial crisis disproved most of what we were taught that day. My law school lecturers sent me home with ridicule for choosing to major in finance…

Few of the finance academics had the integrity to even acknowledge what was going on in the real world. So studying felt like an exercise in futility. Especially when it came time to apply for jobs at investment banks…

In the end, things worked out well. I dodged a career in banking to join you in the newsletter world. After all, many newsletter editors had predicted and profited from 2008.

But there is one educational moment I do remember very clearly from university. Near the end of my course in options and derivatives, my tiny American lecturer asked me what I made of her precious subject.

My response was telling: “I don’t understand why anyone bothers to invest in ordinary stocks anymore.”

It sounds like a silly thing to say. My lecturer chuckled. But I think she agreed…

And it’s not quite as naïve as it sounds. The total value of options and derivatives is about fifteen times larger than the world’s stock markets combined. Over a quadrillion dollars. And derivatives predate shares. By about 2000 years…

So maybe I was onto something after all.

The caveat is that an academic course in how derivatives work in theory is very different from everyday market practice. Had you shown me a stock brokerage account offering options in 2009, I would’ve been mystified. That’s after learning about them for ten weeks…

Of course, not many retail investors go anywhere near options and derivatives in their lifetime. And rightly so. They’re confusing. But what I learned in that university course is what they’re missing out on.

I urge you to discover the same thing. If you disagree with me, at least you’ll know why.

You see, options allow you to make investments that pay off in peculiar ways. Ways that perfectly suit some people’s goals some of the time.

There’s one particular strategy that’s spectacularly well suited to using options. More on that here.

My dad uses options to generate a lot of additional income from stocks he already owns. And from stocks he wants to buy, but not at the high prices they’re trading at today.

Imagine if you could squeeze higher returns from the stocks you already own. Returns in the form of cash income.

No doubt earning income by promising to buy stocks you like on the cheap sounds impossible. But it isn’t.

Most people will tell you that options are dangerous. But the truth is just that they’re powerful and a bit odd.

This can get you into trouble. Another finance lecturer at university told us a story about a friend who went from driving a Lamborghini to renting a flat above an Indian restaurant in the space of a few months. Options were responsible for both episodes of his life.

But all powerful things are dangerous.

The only difference between medicine and poison is the dose, some clever person once said.

That’s why I’ve never understood warnings about derivatives. You can use them to reduce the risk of your portfolio just as you can use them to add risk and return. You can also dial risk up and down by buying more or less of them.

The claim that derivatives are dangerous ignores this.

Last month I had a pair of handymen come to fix a bunch of things I don’t know how to. Nobody ever taught me to use the power tools needed. I’d only buy the wrong ones and injure myself trying to use them. Or burn down the house and cause a local blackout.

No doubt you could fix these things in a jiffy. Because you know how to. You learned it. And have the tools.

Well, what’s stopping you from learning to use options?

The trick is, of course, to do it in a safe environment until you know what you’re doing.

That’s what university offered me. But you don’t want to go near the place these days, trust me.

There are, however, alternatives…

As part of our brand new service, we’ve combined the investing power of options with the analytical power of AI to deliver extraordinary returns.

Every investor will have heard of the particular strategy we’re going to use. But AI and options are the combination that gives that strategy the potential to be extraordinarily lucrative.

If you want to know more, you’re running out of time to sign up to our event. We’re going live this afternoon to reveal what’s behind the curtain.

You might find yourself wondering why anyone buys stocks anymore.

Until next time,

Nick Hubble
Editor, Investor’s Daily