While we’re building new portfolios for our Members we will also be working on a definitive trading book and I want to try something new.
As we now have EBooks in the World, I thought it would be fun and useful to write a more interactive form of book so, rather than boring old generic trade examples – each chapter of this book will include real, actionable trade ideas and, each quarter – we can review them and come up with new trades/new editions so the learning process can continue – year after year.
As Members, I would love to get your feedback so this is, at the moment, a rough outline of the book and feel free to comment on whatever and let me know what’s important to you or unclear or, especially, please contribute to things that you’ve learned along the way? When did things click – which things really stuck for you?
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Introduction: Welcome to the World of Intelligent Trading
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Who is this book for? Beginner to intermediate investors looking for a disciplined, long-term approach to options trading and portfolio management.
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The PhilStockWorld (PSW) Difference: Our philosophy of “High Finance for Real People – Fun and Profits!”.
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Why Options? Leveraging capital, generating income, and managing risk in any market condition.
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The Goal: Not just wins, but consistent, strategic profitability through discipline and patience.
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What to Expect: A step-by-step guide with real-world examples and a commitment to ongoing learning through quarterly updates.
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Part 1: The Foundation – Principles of Intelligent Investing
Chapter 1: The PSW Mindset: “Be the House, Not the Gambler”
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The Core Philosophy: Why selling premium is the most reliable way to profit in the long run (“All Premium Expires Worthless”).
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Patience is Your Edge: Understanding that “Good trades take time. Bad trades take tweaks. Panicked trades lose money.”.
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Discipline Over Emotion: How to remove emotional bias from trading decisions using objective tools and strategies.
Chapter 2: Capital & Risk Management – Protecting Your Nest Egg
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“Cash Is a Position”: The strategic importance of holding dry powder to “pounce on opportunities”.
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The Golden Rule & Cardinal Sin: “Never risk what you do have and do need on what you don’t have and don’t need.”.
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Initial Trade Sizing & Scaling: Starting small (e.g., 2.5% of buying power) and scaling in/out (e.g., 1/3-1/3-1/3) to manage risk and improve entry prices.
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Worst-Case Scenario Planning: Always knowing your maximum exposure and being prepared to own the stock.
Chapter 3: Value First, Narrative Second – Finding Quality Investments
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Identifying “Boring” Blue-Chips: Screening for strong balance sheets, pricing power, and low P/E ratios.
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The Watch List: Our dynamic list of companies we want to buy if they become cheaper, serving as a rapid reference for bargain hunting during dips.
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Fundamental Analysis: Moving beyond headlines to understand a company’s true value and potential.
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Part 2: Options Unleashed – The Trader’s Toolkit
Chapter 4: Understanding the Building Blocks: Calls, Puts & Spreads
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Calls and Puts: A foundational understanding of long and short options.
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Strike Prices & Expiration Dates: Key variables in option contracts.
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Vertical Spreads: Combining options to define risk and reward (e.g., Bull Call Spreads, Bear Put Spreads).
Chapter 5: The Power of Premium: Leveraging Time Decay (Theta)
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Implied Volatility (IV) & IV Crush: How market expectations impact option prices.
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Theta Decay in Action: Why short-term options lose value faster and how to profit from it.
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“Getting Paid to Wait”: Strategies for consistently selling put and call premiums to generate income.
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Trade Example: Selling Puts to enter a stock at a discount (e.g., LEN, MU)
Chapter 6: Core Option Strategies for Profit & Income
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Selling Puts: Our primary entry strategy to “buy a stock for a 15-20% discount”.
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Bull Call Spreads: Defined-risk directional plays for upside potential.
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Income Plays with Short Calls: Generating steady income from long positions (e.g., DIS, KO).
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The Strangle/Straddle for Income: Leveraging range-bound stocks and volatility for recurring income.
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Trade Example: Building an income play (e.g., PFE or SYF)
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Part 3: Building & Managing Your Portfolios
Chapter 7: The PhilStockWorld Model Portfolios
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Long-Term Portfolio (LTP): The core growth engine, focusing on “boring” value stocks for compounding returns.
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Trade Examples: TGT, WHR, BBY, ON, HPE, WAL, PINS
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Short-Term Portfolio (STP): Our primary hedging vehicle, designed to absorb market downturns and provide protection.
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Income Portfolio: Focused on generating consistent quarterly income from selling options on defensive blue-chip names.
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Trade Examples: BXMT, CIM, NLY
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Butterfly Portfolio: High-leverage but conservative setups, emphasizing premium selling (“Be the House”).
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Trade Examples: JNJ, LEVI, VZ
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$700/Month Portfolio: A low-touch, long-term wealth-building portfolio designed for small investors and IRAs, demonstrating “slow and steady” wins.
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Trade Examples: FL, HPE, UUUU
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Money Talk Portfolio: A “bulletproof” portfolio for quarterly adjustments on a live show, prioritizing value over momentum.
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Trade Examples: OZK, WHR, ARCB
Chapter 8: Dynamic Portfolio Adjustments – Adapting to Change
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The Art of Rolling Options: Extending duration (rolling out), adjusting strikes (rolling down/up), and managing cost basis to “repair” positions.
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Trade Example: Adjusting a losing position (e.g., NKE or DOW)
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“Repair First, Then Profit”: A systematic approach to salvaging underwater trades.
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“F, Marry, Kill”: A decision framework for managing positions in volatile times.
Chapter 9: The Art of Hedging – Protecting Your Capital
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The Short-Term Portfolio as Insurance: Understanding hedges as dynamic, cash-value insurance policies, not lottery tickets.
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Types of Hedges: Inverse ETFs (SQQQ, TZA), VIX calls, and puts on major indices.
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Trade Example: Implementing SQQQ or TZA hedges
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Funding Your Hedges: Systematically using short-term premium sales to offset the cost of long-term protection.
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Dynamic Hedge Management: When to add, trim, or roll hedges based on market conditions.
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Part 4: Navigating Market Cycles & Special Situations
Chapter 10: Trading in Volatile Markets: Lessons from 2025
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The 5% Rule & Bounce Charts: Objective tools for identifying support/resistance and potential reversals, helping to remove emotion from trading.
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Adapting to Downturns: Strategies for increasing cash, ramping up hedges, and selectively trimming longs.
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Recognizing “False Calm”: Identifying periods of market uncertainty despite superficial stability.
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Case Study: The 2025 Downturn & Recovery: Lessons learned from predicting and navigating recent market turmoil.
Chapter 11: Leveraging AI in Modern Trading
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AI as Your Partner: How PhilStockWorld uses AI for research, market analysis, and even generating trade ideas.
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Understanding AI’s Strengths & Limitations: Knowing when to trust AI insights and when human experience is crucial.
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The Future of AI in Finance: How technology will continue to shape trading and analysis.
Chapter 12: The Trader’s Mindset: Psychology of Profit
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Overcoming Behavioral Biases: Addressing fear, greed, FOMO, and other psychological traps.
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The Business of Trading: Approaching trading as a professional endeavor focused on consistent, repeatable processes rather than “big wins”.
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Developing Conviction: Building confidence in your analysis and trade plan.
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Part 5: Continuous Learning & Application
Chapter 13: Building Your Trading Journal & Tracking Performance
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The Importance of Documentation: Why keeping a detailed record of trades, adjustments, and the underlying rationale is crucial for learning.
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Analyzing Your Results: Learning from both successful and unsuccessful trades.
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Future Tools: The potential for AI to assist in tracking and analyzing trade history by symbol.
Chapter 14: Quarterly Updates: Staying Ahead of the Curve
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The Digital Advantage: How this book will evolve with market conditions, featuring new trade ideas and results each quarter.
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The “Great Circle of Investing”: Adapting strategies as market cycles unfold.
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Your Ongoing Journey: Encouragement for continuous learning and engagement with the PSW community.
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Appendices
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Glossary of Key Terms: Essential options and trading vocabulary.
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Detailed Trade Examples: In-depth breakdowns of selected trades to illustrate strategies, including initial setup, adjustments, and final outcome (e.g., TGT, WHR, BBY, ON, HPE, UUUU, PINS).
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Recommended Tools & Resources: (e.g., Finviz for charts, Poweropt.com for options analysis).
