Money For the Rest of Us · Wednesday, September 23, 2026
David Stein emphasizes that while options trading can generate income, it's crucial to acknowledge and account for potential losses. He criticizes strategies that focus solely on income generation without adequately addressing the downside risk, using the example of a friend who experienced difficulties when market downturns turned initial gains into losses. Stein suggests that a lack of transparency regarding losses is a significant red flag in investment services.
“But what we don't want to do is confuse the income, the high levels of income we can get from selling protection, selling puts or selling calls, as part of a covered call strategy. We cannot forget that that income is not the return. This is insurance.”
“And low stress trading emphasizes this is an insurance type strategy. But they ignore the potential for losses.”
“And he said it wasn't as fun because he couldn't redeploy because he had these underwater assets.”