I enjoy gardening. Like trading, each seed or plant holds the promise of something more bountiful, growing before our eyes, ready to be harvested in time.
Years ago, a farmer visited me at home. Since we both loved the outdoors, we stepped outside, and I showed him my garden. My tomato plants had grown six to seven feet tall, lush, vibrant green, and absolutely beautiful. With a pat on my back, he asked, “Are you growing vines or tomatoes”.
When I started trading securities, mainly options, most of the chatter consisted of, “this will 5x”, “recently I had a 2X”, or even, “I’ve had this option for 3 months and it is finally a +112%”! On the other side of the spectrum, chatter consisted of, “after 30 days my option is -3.45%” or even worse, “my option is -28% in 2 weeks, should I hold?”.
Are you growing vines or tomatoes?
We’re supposed to be growing tomatoes. But are we really? Some do, others do not. Prune regularly by removing suckers (the small shoots between the main stem and branches) to direct energy toward fruit production rather than excess foliage. With attentive care, each vine becomes a conduit for transformation, from seedling to harvest-ready abundance.
… and, as it applies to options? Many watch the vines of options grow without producing any fruit (gains).
Grow Tomatoes! – Grow your capital!
Example 1
Which is better? Trade 1: Sitting on contracts that have been sitting at a +30% for two months (annualized ROI = +182.5%) in the hopes of +40% (annualized ROI = +160%) next month? OR Trade 2: closing all but 1 contract, re-investing the capital in a new trade for a quick+5% in a day (annualized ROI = 1,825%), then re-purchasing Trade 1. Trade 1 is intact, like nothing happened except basis has changed, and you boosted your return on your capital by 5% in a day. Tomatoes – not vines.
Example 2
Which is better? Trade 1: Sitting on contracts that have been a -32% (or even -5%) for a month with a lot of time left on the contracts. OR Trade 2: closing all but 1 contract, for a loss, re-investing the capital in a new trade for a quick +5% in a day (annualized ROI = 1,825%).
Let’s say your capital in Trade 1 was $100. You lost 32% ($100-$32) which left $68. Trade 2 brought you +5% increasing the $68 capital to $71.40. Trade 3 in day 3, another 5%, capital $74.97. This is a long road, but one that will work out by the end of day #8 when you have completely recovered your Trade 1 capital (less one contract). Tomatoes – not vines.
Example 3
Which is better? Trade 1: As I watch my trade, it climbs to +6%, then dips to -1%. It rebounds to +7% but suddenly drops to -4%. What a ride. OR Trade 2: Catching the next +5% (more or less), selling all contracts but 1, then re-entering the trade the next time the lone contract reflects a + or – 1%? Milk the trade – Fill your basket! You will want to read this post.
Summary
Perhaps I am wrong. Perhaps generational wealth is not what people want. Maybe people want the satisfaction of being able to say that they have owned $IBM for 30 years and have watched the value 10x. How many swings did IBM have in ten years? One year? One day?
Lastly, many will analyze a services portfolio and report that 70% are losses, or 50% losses (vines). But guess what: 95%, if not 100%, were winners (tomatoes) at some point between the start and end of the trade.
Make it happen!
