The Benefits of Combining OTM Options with Other Strategies
How to become a millionaire in China.
If your goal is to reach a seven-figure balance in your bank account, today I'm going to give you a lesson that may open your eyes.
In China, there are four alternatives if you want to become a millionaire. The most common one is to have a company, and this company makes you a millionaire. In fact, 50% of Chinese millionaires made their fortune through owning a business. On the other hand, only 15% of Chinese millionaires made their fortune through the stock market.
What do these investors have in common?
If there is one thing they have in common, it's that none of them achieved it through index funds. I repeat, none of them. I'm not saying that it's not an excellent alternative if you want to preserve your purchasing power and increase it in the long term. However, if you want to be part of that 15%, you should not do it that way.
How can I join that 15%?
There are several alternatives:
Invest in a concentrated way in small/mid caps.
Yes, if you invest in the next Amazon in a concentrated way, you'll be part of that group. But you'll have to invest when it's still a company with a market cap of less than $500M. For example, Tesla has made more than +1,100% since 2015.
Here's the second example to become one of those 15% millionaires. If you want to invest in the S&P 500 because you don't know which will be the next Amazon, you should do it with leverage. You have two options: through a leveraged ETF or through options.
As a recommendation, this should be done in extreme market situations when the price of indices has decreased significantly.
Through a black swan.
Something extremely complex happens, and you have multiple calls and puts bought very OTM.
Combine several strategies.
If you don't have a crystal ball and feel overwhelmed about having to pick stocks or think you're the worst analyst in the world, don't feel bad. You can still be rich. In fact, I'm not going to lie; I'm also a horrible stock picker. This is why I decided to move to options 2 and 3.