There are lots of ways to get rich. One guaranteed way to never get rich is consistently acting without patience.
Here’s how I learned this.
I Got Fearful and Greedy Writing Options
One strategy associated with writing options is writing credit spreads. A credit spread is when you get paid for selling one call and buying another as a hedge. If both expire worthless (or just slightly in the money) you profit. If they both go in the money, your max loss is the difference between the spreads. More on options writing here but this one is about writing covered calls, not spreads.
Basically, I sold a bet that a stock wouldn’t go up a certain amount. If it didn’t, I kept the money for offering the bet.
What happened? The stock went up. Instead of expecting this as a statistical inevitability, I got scared and tried to buy back my bet.
My thought was I would limit my loss so I would only lose some money, and not all I had staked on the bet (a few thousand).
But of course, after I bought back my bet, the stock went back down. My bet was actually the right call but I got scared.
No Big Deal, You Win Some, You Lose Some…Right?
Theoretically, yes. But I compounded my loss by getting emotional about it.
Initially, I was impatient and tried to save a little money and covered my spread too early.
I got frustrated with myself for losing this bet, so I tried to make up for it by selling another spread (AKA another bet, this time betting a stock wouldn’t go down a certain amount).
And then it happened again.
My second spread ended up going partially in the money (which means I was going to owe some cash). I covered this one early, too, before it lost more (which ended up being the right call).
In total, I lost thousands in a matter of 24 hours.
Ouch. Isn’t that Just Bad Luck, Though?
Yes and no.
Yes, I don’t control the stock market, and all my investments could go to zero tomorrow.
On the other hand, my second bet was emotional. I made it not out of calculation, but out of emotion. That was dumb.
When it comes to money, don’t let emotion drive your decisions.
If I Had Patience, I Would Have Had Profited
What was the one thing I needed to not lose money on both bets?
I didn’t need to panic and shouldn’t have. I wasn’t desperate for money that week—but I had convinced myself I needed to earn X thousands per week.
Even the slight tweak of “I need to earn X thousands a week on average” could have saved me. I could have accepted a minor loss and understood I’d have another unusually positive week later on.
Patience to Wait Out the Storm
Instead, I moved out of fear, tried to cover the first bet prematurely. This was my initial mistake. If I had simply accepted the risk (the week wasn’t even done yet) then I would have ended the week with a meaningful profit.
Patience to Accept Temporary Loss
Once I had locked in my first loss, I emotionally tried to open up another spread (bet) on the downside as a way to recoup some of my loss.
The downside spread profits would have been so minimal (a few hundred bucks) that it was not worth risking the thousands it takes to open that kind of spread. But I did it because I was annoyed at losing cash on the first bet.
I wouldn’t have even attempted this bet if I had been thinking rationally first and emotionally second.
Now, not only did I lose money, but since money itself is the means to earn more money (especially when writing options) then I hurt my future earning ability.
What Happens Now?
To those who know me, don’t fear for me. I didn’t get wiped out or anything—I’m just outlining the pain of this to drive home the lesson to others.
Honestly, I’m grateful I only spent a few thousand learning this lesson now instead of a few million later.
I don’t like learning this lesson. But reflecting on loss is absolutely crucial to avoid repeating it.
1. You Don’t Get Rich (or Keep Wealth) Without Patience
Be patient. If you can’t afford to be patient, you’re playing the wrong game.
Patient in my context means weeks, not years.
If you want to invest in a meaningful project (like a startup or value stock) then you will face investment lockup for years.
If you’re going to lock up your cash for years, then you need to make sure:
- It’s a solid, promising investment, and
- You can afford to live, breathe, and thrive while you wait for a fat return
2. More Money Affords You More Patience
If I had more money to play with, I would have a smaller target to earn each week from writing options.
This isn’t a lesson you say “oh, I should just get more money! Why didn’t I think of that?”
The actionable item is to check yourself: “how much patience can I afford with the money I have right now?”
Big money is like a behemoth. It moves slowly and deliberately.
Small money is like a rabbit. It’s fearful and moves erratically because it has to adapt more quickly. It creates a lot of wasted energy.
Rabbits also get eaten 100x more than elephants. Consequently, they also need to reproduce faster. Easy come easy go.
Want to play the long game? Fortify your patience. Want Only play with what you can afford to wait out. You need enough money to have the mental fortitude (and actual economic ability) to wait out downturns.
Scared money will lose money.