Greetings, I was very interested in your comments about making money as a business using options. That means you must be able to generate at least monthly cash flow. What about weekly? How? Books or other resources to get started? Thanks. Cory

Cory,

I trade stocks as well as options, although I do trade a lot of options. I monitor my profits weekly, monthly, and yearly. I sometimes have weeks that are not profitable. I rarely have months that are not profitable. And I can't imagine having a year that's not profitable.

But it's just like any other business. You determine your overhead and expenses, and try to determine if you can make enough profit to cover expenses and make a living. And just like any other business you have to make sure that you have enough capital (I can't say how much, because it depends on the individual) and enough expertise to make it work. Also, just like any other business, money management is what is going to make or break you. This business is not about being right or wrong. It's about capital preservation. If you can avoid large losses and preserve your capital, the profits take care of themselves. People have a hard time accepting that, but it's true.

I am very hesitant to recommend just a couple of resources because there are so many that should be read. But since money management is the most important element then I would probably start off with Trade Your Way To Financial Freedom by Van Tharp. It's not about options, but it's the best book on money management that I've found.

And then after you've done a lot of reading, it is very important that you develop your own style and strategies. Don't try to copy anyone else. You have to have a passion for it. If you do, you'll start learning and you won't quit.

Larry

Hi Larry - Have you (or any of your readers) had any experiences with Traders Accounting (www.tradersaccounting.com)? They are an accounting company that specializes in setting up legal identities for traders. I am interested in pursuing this avenue for my trading. I have received an initial analysis from them. It has many interesting suggestions on setting up a business. (Of course, they are willing to help us.)

Also, do you have any comments on setting up a legal identity for trading?

Thanks,

Dave

Dave,

Thanks for the heads up on TradersAccounting.com. I read some of it, and it's very interesting. I think we're doing most of what the site suggests already but I'm going to have our CPA look at it to see if we're missing anything. But as a general statement, I'm a believer in setting up a legal identity for any business, including a trading business.

Larry

i read your letter to larry and his reply.
i think he offers great advice and i have read
the book he recommended by van tharpe - it is
excellent. van's website is www.iitm.com.
he offers a newsletter too.

anyway, a book on options that is great is:
"the options advantage" by david caplan. it
talks about the nature of options, pricing,
implied volitility and suggests several simple
spreads and when to use them.
i liked it very much.

i do NOT trade options for a living but plan to.

good luck.

Thanks Joe, for the Caplan book recommendation. It looks like a really good one. I think it mainly covers options on futures, but I'm sure that the same principles apply to options on stocks.

Another really good one is Larry MacMillan's Options as a Strategic Investment.

Larry