How to Be the House - not the Gambler
Buying/selling stocks is like buying/selling houses. If I buy a $1M house and the housing market rises, I might sell it later for $1.2M. Of course, prices can go up or down, but historically, they’ve trended upward over time, and if you’re in it for the long term, historically, real estate (and stocks) have been good investments.
Stock options, however, add an element of time to the equation, and while stocks can go up or down, time only goes forward. And the addition of the element of time enables you to profit from the certainty of time going by. How exactly? Read on.
Call Options: Selling the Right to Buy
Let’s say you own a $1M house. You’re not looking to sell, but if someone offers you $1.5M, you may be willing to sell. That’s a call option—it gives someone the right (but not the obligation) to buy your house for $1.5M within a set time.
Now, here’s the kicker: someone will pay you for that right, for example $100k.
Why would they do that? Because if the housing market jumps and your house becomes worth $2M, they can still buy it from you for $1.5M, securing an instant $500k gain.
You miss out on selling at $2M, but you still make:
$500k above your original $1M home value
Plus the $100k from selling the option
Put Options: Selling the Right to Sell
Now, let’s flip the scenario. You don’t own the $1M house, but if someone wanted to sell for $500k, you may be willing to buy.
So thats a put option. Someone else—who does own it—may be afraid of a market crash, and is willing to pay you $100k for the right (but not the obligation) to sell you the house for $500k.
Why? Because if home prices crash to $250k, they can still sell it to you for $500k, avoiding a bigger loss.
The Real Power of Options: Probability on Your Side
Extreme price swings are rare. Most of the time, a $1M house will stay within $800k–$1.2M in any give year. That means:
If you sold the right to buy at $1.5M, and the price stays below that? You keep the $100k and still keep the house.
If you sold the right to sell at $500k, and the price never drops that low? You keep the $100k without buying anything.
And you can do the same thing next year!
Be the House, Not the Gambler
This is just the tip of the iceberg of what investing in options enables, but the key takeaway is: options let you stack the odds in your favor.
Think of a casino. They don’t win every bet, but because they have a slight edge, over time they make a ton (!) of money.
With options, you’re not gambling on stock prices which can go up or down, or up and then back down—you’re using probability to generate consistent income. And when the odds are on your side, you become the house, not the gambler.
