Welcome to The Boomer Business Owner. My guest today is John Richardson. John is a Baby Boomer, and the founder of www.consistentoptionsincome.com. He has been trading stocks, options, and futures since the late 1980s. John believes that traditional investment and trading approaches will only disappoint. His unique approach and view of the markets helps put strategy and probabilities on the side of the trader. John has a passion for passing along his insights on how to consistently make money in the markets. Hey, John. Welcome to the show. Great. Thanks for having me, Charlie. All right, so we re going to talk about www.consistentoptionsincome.com, but prior to doing that, maybe you could just take a few minutes and talk to us about your background, and what qualifies you to teach people about options. Sure. I ve lived in Southern California for most of my life, so I was kind of exposed to the Navy in San Diego. I went to school at USC in LA, and got a commission when I was graduated from USC. So I spent about four years in the Navy, and I got out. I flew airplanes for a bit, not really making a living, and finally I got on with EDS in the late 80s, and I started making a reasonable amount of money, and I found myself with some disposable income. So that s kind of what started me on the quest to try to figure out how to be a good steward of my money. Obviously, I was confronted with all the things people normally find when they walk into a Fidelity or a TD Ameritrade office, something like that. So it kind of set me on a quest, a multi-year quest to try and figure out how best to manage my money. It s been a lot more of a challenge than I certainly thought it was at the beginning. Page 1 of 14
Did you take courses, read books, all of the above? Yeah, I think I ve done all of the above. The things that worked out for me the best were the grunt trial and error, trying things myself. I ve grown kind of skeptical over the years. I don t really listen to what other people have to say too much anymore. I have to have things proved out by myself. I get that you taught yourself. Did you ever spend any time working in the financial services business as an options trader or something like that? No, no, I ve always been a private personal trader. I ve never worked as a professional in the industry. It s always been about: How do I best manage my money? It doesn t really matter who we are. Your show is geared towards Baby Boomers, and all of us now are thinking: No matter how much wealth we accumulated over the course of our careers, somehow we have to turn that into an income, and in an environment of zero interest rates, it can be quite a challenge. Okay. Let s dive into what it is you do. Instead of me prefacing every question with this, I ll just give you a general preface. If you could just answer the questions, or as a part of the conversation, speak in as layman terms as possible. How about that? Sure. No problems. Okay, so what is an option? Okay. Yeah, that s pretty basic, and I know a lot of people aren t familiar with options. I think the best way that I found I describe it to people is it more like an insurance contract. Right? So you have an insurance company who s selling you, let s say fire insurance for your house, and as a consumer, you would be buying the insurance contract. That s kind of what options are. Page 2 of 14
Let s say if we take call option, that gives me the right, but not the obligation to buy a stock at a certain price in the future. When you get into it at that sort of level, it can be quite confusing. However, at the end of the day, there s these things out there that you can trade just like stocks. At the end of the day, it s pretty much about buying and selling puts and calls, just like you would be buying and selling shares of stock. Okay. So that begs the question: Why would you trade some instrument that is derived from the underlying security of the stock or bond, instead of trading that yourself? Sure, that s a really good question, and that s one of the big advantages of options is they re a lot more flexible. You can put them together in different sort of combinations. One of the profound takeaways that I have from years of doing this is that we don t When we make predictions, the chances of us being wrong are pretty great. There s a classic math geek statistical study, if you will, regarding the Let s Make a Deal gameshow. On Let s Make a Deal, Monty Hall would always give the person who was picking the right door, usually they d pick one of three doors or something like that, and he d always give them the option to change and pick a different door. The statistical study, the takeaway is pretty clear is that the people who changed their original prediction are the ones who win more often. That s kind of what I try to set up with my trading that I kind of take a position in the market, but what I do is I go into it, planning that I m going to have to adjust that trade, in other words, I m going to have to modify my prediction based on what the market s doing. I don t want to wait until I m in trouble, and realize that: Hey, I just made a real bad prediction. I want to be more nimble, and options are a way that we can do that. Page 3 of 14
At a very high level, you trade your own money to generate income, but you also teach other people how to do this through a course you have. Correct? Exactly. I think somewhere around 2005 or so, I started trading this particular method that I teach in the course, and as I saw what other people were doing out there, I was thinking: Pretty much anybody can do this if they put a little time and effort into it. And I thought I could really benefit some other people, so I put together a course. Looking over your website and your materials, I m paraphrasing this, you ve made some reference that if your thought is you want to make millions of dollars, and lots and lots of money, and win big trades through options your course is not the place to be. You preach more consistent, modest profitability. Is that a fair comment? Exactly. I think that s probably one of my biggest takeaways from my experience has been that it s the people who are sort of swinging for the fences and trying to hit home runs, they re the folks who end up losing the most. It s kind of a self-fulfilling prophecy, because the reason why they re swinging for the fence is because they lose so often, so they need a big win to make up for all those losses. Whereas I think the proper approach is to sort of temper your expectations and what s possible, and then try to do that on a more consistent basis. It s kind of the tortoise and the hare type of a comparison. Okay, I m going to put myself in the position perhaps of a listener who is intrigued by what you re saying. Always interested in learning how to generate some additional income. However, I don t come to the party with a stock background, a securities background, an options background, so I am really starting from scratch. Will your course work for me, or should I bring with me some previous knowledge, if you will? Page 4 of 14
Right. I start off assuming that you know how to trade options. On my website, I actually have a link on my FAQs page to I believe it s the Options Industry Council, they have a lot of free training. There s a lot of packaged courses and stuff out there that costs a lot of money, that will basically just teach you the basics, which are out there, available for free. I think once people get a basic understanding of options, they realize that it s not such an easy game, and that s usually when they end up coming to my website for my course. There s a little bit of a learning curve with options. Let s say if you ve traded stocks before, if you re coming to options, there s a little bit of a learning curve, and it mostly has to do with the concept of buying one thing and selling another as a single trade. Once people get past that hurdle, then a lot of other possibilities open, including the approach that I m taking. What options, no pun intended, do I have if I purchase the course, and I still have some questions? Maybe I have a little background, maybe I went to get some general information on what s going on, but I really don t understand something that you re talking about in the course. Is there access I have to you, can you send me an email, do you do weekly office hours? What, again, options might I have? Sure, I definitely support the course. Email is usually the easiest, because I can fit it in in my free time. I do arrange phone calls if people have questions that way. When I went into this, it was, it still is for the most part, a part-time endeavor, selling the course and teaching other people this method of trading. I think I was really worried about it, that it d zap all my time and I d have to shut it down at some point. I think I went into it with that mindset when I created the course. I went into the nth detail in the content of the course, so that people wouldn t have a lot of questions. Page 5 of 14
In fact, I think one of the benefits and I think one of the things that separates my course from other trading courses that are out there is that in the course itself, I have 48 different trading months that I go through, and we walk day by day for 48 different trading months, and apply the rule for the strategy. By the time you get done with 48 different trading months If you ve been trading a while, you know that no two months are the same. You come out with little grey areas left, I think. I ve been happily surprised that I don t get a whole lot questions, at least about the strategy and the course content. It has to do more with people s particular situations. John, I know there are no guarantees, so to speak, but if someone comes into the course with some kind of a background as you mentioned, and they do what you suggest they do is there a reasonable expectation that they should be able to produce at least modest positive returns for themselves? Yes, definitely. The whole purpose behind the trade is to do something that s very high probability, where we re lowering our expectations. In all sorts of different kinds of trading, the higher your probability of profit, you re going to have to give up something in return for that. What we give up is the potential of making a ton of money and becoming millionaires overnight. What we re giving up is that upside. We can make modest returns, and if our expectations are modest, we can set up a very high-probability situation. To set up that situation, it s not rocket science. I kind of put everything together in the course so people can implement it. They ll be participating in what is a pretty high-probability trading situation. So the expectation for modest returns is, like you said, isn t certain, but it s probable. Page 6 of 14
Is there an optimal amount of capital that a person would want to bring to the table? For example, if I said to you: I have an extra $3,000 in my savings account, I d like to implement your program. Or on the flip side, I say: I have 3 million dollars I d like to just throw in right now and get started with, can you give me some guidance, there? Sure. On the low end In the course I teach everything in terms of one unit, this is how we trade one unit. You can trade as many units as you want. However, to trade one unit, you ll need at least $4,000. It s what I call a set aside. It s a $4,000 set aside. We don t use up all the 4,000 in margin, so there s a cash component and a margined component. As the trade evolves, that will change a little bit; we ll have to use some of the cash to make adjustments and things like that. However, we calculate our return based on whatever money we set aside for the trade. Our profit target is $200 for each 4,000 that we deploy, and usually we can turn that over in a month, so we re looking to make let s say 5% on whatever capital we have deployed. On the high end, there s probably a limit out there somewhere. In other words, when you come into the market with too large a trade, all of a sudden the market makers or whoever s facilitating the market is going to look at that trade, and wonder what s happening, and wonder if they can get off the other side of the trade. I do think that there s an upside limit somewhere to how big you can trade with this methodology, but I don t really know where it s at. If you start out small and you start seeing the bidask spread widen or it s hard to get your trades filled, you know maybe you re getting too big, so Reasonably, would you think $100,000 is not an unreasonable amount of money to work with? Page 7 of 14
Certainly. I had one gentleman tell me he was doing just over a million dollars. So, I don t trade that large, but a couple hundred thousand is no problem. This one gentleman told me he was doing over a million dollars in the trade, so the first thing I asked him, obviously, was: How s your execution? Are you having problems? And he wasn t, so, the limit is somewhere above that. Got it. I want to shift just for a second to your business. We were talking about your course, but your business and online. You have a nice online presence. How do you use online to maybe market yourself, or market your course, or educate people, things like that? Sure. This has been a lot of trial and error for me. I kind of started trying to put the course out there. I didn t really get it out until 2008. Since about 2008, I ve been kind of in the depths of it, trying to work things through. I ve tried a lot of things over that period. In the beginning, I was advertising in trade magazines, and that actually worked out pretty good. I think if that had failed, I probably still wouldn t be around. Right? I got some pretty good traction that way, because the industry is not that broad, and at the time, there s only a few magazines that catered to this industry. I eventually got into some of the precursors to AdWords, what is now Google AdWords, and that s probably been the mainstay of my advertising. I ve tried email marketing, using other people s lists, and maybe display ads in newsletters, online newsletters and things like that, or other websites none of that stuff s ever really shown a good return on investment. I always tend to end up coming back to AdWords in some form. I try to do webinars, so I will accumulate an email on my website as people sign up for my free videos on the website. I send out occasional emails to them, advertising webinars, things like that. Page 8 of 14
Also what I m doing today is talking to other people in the industry about what I do on podcasts and things like that, and that s been very helpful as well. If I can remember correctly on your website, you talk about the course being available on DVD. Is that still the case? Yeah, I usually mail out the DVD overnight mail so it keeps it more as a tangible product. Do you have any intentions of putting it online, as an online course, or do you just like the concept that someone feels that they re getting something for their money? It s a little bit of both. One of the places I skinned my knees early on was everybody always talks about how the internet is a dangerous place for consumers and whatnot, and getting ripped off and stuff like that, but you ain t seen nothing until you ve been a vendor on the internet. One of the first experiences I had was someone who had purchased my DVD was making copies of it, and reselling it. So I ended up coming up with some copy protection for the DVD. I think it s primarily why I send it out that way, is I can kind of prevent people from copying it; whereas online videos are easy to download and redistribute. That is one of the things I had to overcome. Looking forward, what do you see next in your evolution? Do you see other courses, maybe more advanced courses, just continuing to market this course to a broader audience? Just your larger mission or vision for the stuff that you re doing. Sure. The mission for me is to try and help other traders, because it s not just so much giving people a way to make Page 9 of 14
money, but it s kind of a necessity right now. The insolvency of social security hanging over it, zero interest rates, people are having a hard time finding places to generate income. To me, that s the mission. As I think of different ways that I m doing that seem to work, I have come up with a few other offerings over the years. But none of them work out as well. In fact, right now I include what I originally created as my smart levels course in with my options course, so I combine the two courses now. I tried to sell the smart levels course on its own, but it was kind of in a genre of technical indicators is where it fell, and it was hard to get any sort of visibility because it s such a crowded space, and a little disreputable, I would guess, too, the types of things that you find there. I tried a couple of other offerings over the years. I had a Paris trading service that I tried to market, but I think the dollar value of The starting capital you would need for that type of trading was a little bit too high. So, I just couldn t generate any interest. I try different things over the years. The options course seems to have been a survivor. With due respects, I m hearing two different messages, John. You talk about traders, attracting traders, and advertising in trading or industry magazines, which would lead me to believe that the target market for your course would be people who are predisposed to trading. Yet, on the other hand, you talk about supplemental income, I don t know if you ve used the word retirement or not, but someone looking to supplement their income with what they re doing. Which is your primary target market? Is it someone who fancies themselves a trader, or can you teach someone who doesn t have a trading background, with the understanding that you said earlier, they need to get Page 10 of 14
themselves a little bit up to speed, but can you teach someone who doesn t have a trading background who is hanging out and retired to be able to generate some additional income with your system? Yeah, I do use the word trading fairly liberally. The guy who buys a few shares of Facebook, and Amazon, and just says he s holding them forever I see him as a trader as well. I know people would say that s more of an investor. At some point, he s going to sell his stock, and it s probably going to be at the absolutely worst time. That s just the way it is. Even the folks who maybe walk into the Fidelity office, want to outsource the management of their money, thinking these people know something I think of them as traders as well. At some point, they re going to fire their money manager because their quarterly statement looks back, and so they just have a different timeframe, really. I see them as traders. I don t see the work I do really any differently, we re just kind of in different time frames. I think everybody should have a trader mentality about it, in other words, you re making decisions about where you re going to put your money. Once you put your money somewhere, you really should be thinking about when you re thinking of getting your money out of that investment or trade. I see it as the same thing. I think people are fairly reticent to take ownership, because they feel they don t know anything. What they do is they lean on Fidelity or something like that, and they think that they know something. Anybody who s been around this industry a while knows that nobody knows anything about the future, and people are better served taking control of their own investments. John, let s wrap up with this. I m your friend, I m your neighbor, and I say: Hey, John. I m retired. I m going to retire. I m not retiring any time soon, but I m working for Page 11 of 14
somebody else. Regardless, I m looking for a way to generate some additional income. I know you have a course, but at the core of it, you re a successful entrepreneur. Are there any high-level tips you would give me in starting my career to make some additional income on my own? As far as trading or starting a business? I would say starting a business in this situation. Sure. We re really in the information age, so really, the internet is all about information. I think most people, most neighbors that I have have some skill or specialty that they know something about that gives them an edge. I think if people stop and think about it for a while, they can find something where they can provide value to other people. I think being able to put together a course, and then market it at low cost on the internet it makes a lot of sense. I have a pretty good friend, he owns a landscaping business. He has a website where people can sign up for his services and stuff. We were talking about the possibilities that he has, and he learned a lot of stuff putting his business together. Landscaping is a pretty common thing, so he s on a quest to put together a course to teach other people how to put a landscaping business together, because it s not that easy and he s learned a lot of things over the years that could save people a lot of time and effort, starting a landscaping business. It doesn t really seem like an online type of business, but here he s been able to work on creating a product that could really provide some value for other people. I rarely do this, but I want to extend something you just said, which please correct me if I m wrong. A lot of us have skills, abilities, and talents that we take for granted, Page 12 of 14
like your friend with the landscaping business, and there are other people who could benefit from that. The concept of takin something that you think is really easy to you, that you do, and to your point, maybe creating a course, or some way, shape or form disseminating that information for some compensation to other people is a very viable option for someone who is in the category I mentioned; somebody who s working for someone else, they want to stop doing that, etc., etc. Correct? Exactly. The tools we have available to us now provide lots of opportunity. When I started putting my options course out there, I knew I was a competent trader, but all of a sudden now I had to become an educator, and I had to become a marketer, I had to know how to create websites. It was kind of daunting, but you watch a few YouTube videos, and anyone can become at least reasonably competent in those different areas. I still don t think I m a great educator, but I just felt that: Hey, if I just put this information out there, people will understand the value if I do it in a reasonable way, in a credible way. Marketing is something I always struggle with. It s a weird science. I think anybody who s in business or in trading for that matter, you always worry about when the golden goose is going to stop laying eggs. Right? So you re always looking for ways to improve what you do or extend it, based on the feedback you re getting. John, what s the best way for our listeners to reach out, connect with you, and learn more about you and your course? Sure. I have a website, it s www.consistentoptionsincome.com. They can contact me through that website. Also they can reach me at JR@ConsistentOptionsIncome.com. For your listeners, I have set up a special page, it s at www.consistentoptionsincome.com/boomerbusinessowner, and Page 13 of 14
they ll have a special training video there I ll set up, and access to some additional free videos. Wow, what a pleasant surprise. I did not expect that, so thanks very much for that. All of the great resources mentioned in today s episode will be available on the show notes page at www.theboomerbusinessowner.com. John, thanks so much, on behalf of all of our listeners; we really, really appreciate your help. Thanks, Charlie, and thanks for having me. Keep up the great work with your podcast. Page 14 of 14