A friend bought a stock that dropped 50% but made an 18% return in 21 days with a covered call, well above the typical 8-12% monthly return. The speaker argues that even losing trades teach you something if you stay curious about what went wrong.
18% (over 21 days).
8% to 12% per month.
Bought at 6, now at 3 (down 50%).
I was talking with my buddy. He bought a stock at 6. It's now down to 350. Let's call it 3 for easy math. He's down 50%. Man, I just feel like I haven't learned anything. I'm like, whoa, whoa. What do you mean? You knew it was a play on the opportunity. You generated 18% on the front end with the covered call. So now you know how to do a covered call. Now you know how to buy a stock. You learn two things right there because you've never done it before. Third thing is, is now we know what we should be looking for when you acquire the stock. What's going on with the news? Why am I getting such a high return on the money? Because 18% in 21 days is a lot of return for a covered call, so that means it's very specul. Usually a good covered call in a month is usually 8 to 12%, depending. But now we're at 18. So the higher the return, typically I got to step back and say, oh, what's going on? So I learned that, and then I got to learn about the news. What's going on in the news? So, literally, he learned, like, 30 different things that he didn't know. He learned just by talking it out. And more importantly, he wasn't afraid to lose money. He was more excited to get in the game of the stock, if you will.
