Transcript of Trading Options 101 with NFL Linebacker Turned Wall Street MVP Pete Najarian

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It was a wild a wild trading. People would either fight on the trading floor, which was a big mistake.

You can pass on one question. I don't need to pass on it. Pete Najarian is an NFL linebacker turned options trader who became one of the most successful and recognizable figures on Wall Street. He and his brother John co-founded Options Education platform Option Monster, an online brokerage firm Trade Monster, which were acquired by eTrade for $750 million in the United States. If you're watching this on video, you will see that he is 10 feet tall, has a tea, a rat tail, the whole thing, and has watches and bracelets that make a jangling sound throughout the interview. He basically comes with his own sound effects. Today, Pete and I get into what's actually happening in the markets and where there are big opportunities for investors.

I've been extremely bullish and continue to be so in some of the precious metals, both gold and silver.

He also breaks down how to invest in options and whether or not you should.

It's my way of buying insurance. You buy insurance on your car, your car is only worth 50 grand, right? Or 70 grand, whatever it might be. But If your option position or your stock position might be worth millions of dollars. So why wouldn't you protect that by buying the puts that would then protect you?

Then we get pretty deep and go into money confessions that most people don't say out loud.

Yeah, that was a tough one. That was brutal. It's still brutal.

I'm Nicole Lappen, the only financial expert you don't need a dictionary to understand. It's time for some Money Rehab. Pete Najarian. Welcome to Money Rehab.

Thanks. It's wonderful to be here.

So excited to have you here. So I don't know if you remember, but a million and a half years ago, circa 2003, 2004, I was a baby reporter on the floor of the Chicago Merck and the Ceebo. And I was at First Business Network.

Do you remember this? I remember First Business. Yes, absolutely.

May it rest in peace. It was nationally syndicated morning business show, and I was a reporter, a technology reporter at the time, reporting on the advent of Gmail, stuff I should have really bought back then. And you and your brother were larger than life characters. But to be fair, all the men, and really, there were 99. 9% men there, were really larger than life characters. It was such a locker room situation mission back then. And so you won't remember me, I'm sure, but I remembered you and all of the traders there that really made that experience for me, my foray into business.

You described them perfectly, the description of who they are on the trading floor back then, especially. But I was so buried into the pit that I was in. We had the largest volume pit on the trading floor of the CBOE at one time. It was Micron technology was the primary stock that people trading. At the time, most people had never even heard of them. They didn't know what they were or anything because they had names like Intel and others that people were familiar with. And now people know more and more about Micron because it's become a big deal. But back then, it was just a phenomenal trader. And I just said, Hey, look, we got to attack this thing and go after. Because we didn't expect that. There was a point in time in the world where IBM only traded in Chicago, and Micron pretty much only traded in San Francisco and stuff like that. And then eventually, Actually, everything started to come together and everybody could have it on whatever exchange you were on. You could trade those options. It was a wild trading pit.

Unbelievable. I liken it to a Middle Eastern bizarre/frat house.

Well said with the frat house. You're right.

If you could take people into that world, because it's not that way today. Now everything is a backdrop for CNBC. But back in the day, I remember I couldn't wear heels that were over a certain number of inches or skirts that were too short. The women's bathroom was super teeny tiny. I think there were two or three other women there. I was in the middle of the pit one day, and some guys, I don't think it was you, but picked me up and moved me out of their way. It was that crazy Wolf of Wall Street vibe. Yeah.

Well, when I got done playing football, some of my friends were still playing. I had one really good friend who was 6'6 and about 340 pound guy, so a very large human being. And when he came to the floor, there were guys offering him money just to be able to hold a spot for them in the trading pit. Oh, my God. It's amazing. I mean, he was literally, and this is about 1994, four or five, something like that. And he was getting 100 grand. They would pay him just to stand there and hold a spot so that when they come back in the trading pit, they can get their spot again because this man's got it. So he didn't do it, but it was an that he was looking at. But he ended up being a coach in college football, and he's still in college football to this day.

He needed that physical presence because it was really man to man combat going on there.

Well, it's why John and I both look pretty ridiculous, and we both know it. We've got these... Well, we used to have a lot more hair here, but I've always had longer hair. And that, and then grow your goatee out a little bit and make people think that you're somebody that you really aren't, but they are maybe a little intimidated. So they see and they're like, Well, this guy doesn't have anything to lose if we fight. Because there are fights all the time, and I don't know if you ever saw them, but there was a lot of times on the trading floor, people would either fight on the trading floor, which was a big mistake because that's going to be a find of a lot of money, or they would go outside by this thing called the horse. There's a big horse statue out there, and they would go over there and fight over there. So there was a lot of sports that really came into this whole thing. Maybe boxing, if you want to, or wrestling.

I mean, there was so much testosterone.

A little too much.

But you and your brother always had a vibe. You and your glorious goatee, his hat. I mean, it's not like a Wall Street vibe. And look at your jewelry, again.

Yeah, still to this day, right?

When somebody thinks Wall Street, they're not thinking big, clunky jewelry and long hair.

No, they're not. They're looking for the really clean, preppy guy who came from or from Harvard or whatever. And we were pretty big at one time on the trading floor. I think we might have peaked out at about 20 some odd traders that we backed. It's funny because some of the guys that we had, not one of them actually had an Ivy League background. Most of them barely got out of high school. But it became something where we were looking for somebody who's aggressive, and were they smart enough to be able to figure this out and do it and execute? And with the aggressive side, it really makes you a much better trader, right? I mean, so that's what we did. And by the way, when you're speaking about women, we had the most women traders of any group on the trading floor. How many? We didn't care if you're male or female or anything. Can you execute when you're down there? And so I think we peaked out with five girls at one point in time and probably 20 guys, something like that.

I'm glad that you well represented. So let's get into the state of the market right now, because it always feels It's like it's cuckoo chaos.

The markets just don't like uncertainty, right? I mean, that really is the big deal about the markets, because when there's certainty out there, people are pretty comfortable and they do their thing. But all of a sudden, you throw a few things in there, the government shutdown or whatever you want to say, it's going to cause the market to have a little bit of a tummy ache for sure.

Where are you seeing right now opportunities? There's so many sectors that feel overhyped. Where are you bullish? Where are you bearish right now?

I've been extremely bullish and continue to be so in some of the precious metals, both gold and silver. What about copper? And copper. You mentioned that one as well. That's a good one. And shoot, there's a few others out there that hardly get talked about. But a lot of the time, we can just see some of these things playing out because John and I built these algorithms that show us different trades that are happening around the markets. And they've been just spot on. It's just been absolutely amazing just to see coming Coming in to buy GLD, which is a gold ETF, and the SLV, same type of thing, where we see huge monstrous call buying. And when we see that, we really don't listen to anybody on TV. We really don't care what they have to say. We go through all these other things, but that is telling us a lot. And it's been amazing. The run that's been to the upside has been absolutely incredible. It's not always a perfect line that goes bottom left to the upper right, but it oftentimes gets there to the upper right. It pulls back, which is a healthy way to watch something move.

Generally, you're not going to go straight up. You're going to have these points in time where it pulls back a little bit, then it starts to springboard again and then again and again. It's been going on for the better part of at least a year. And it's interesting because I'll call my brother John up and I'll go, Hey, did you see they just bought 113,000 calls just today on GLD in one trade? Did you see that?

We so have to decode with that. So okay, I want to get into a complete cheat sheet around all the options. So when I was taking the Series 65, I remember having a cheat sheet thing with buy, sell, calls, and puts, and which ones are bearish and which ones are bullish. And honestly, you have to help me because they can get really, really confusing. But it's so important to talk about what those movements are because it tells you so much. Sorry, I'm continuing in you, and then we'll double click.

Well, it's interesting because when we start to see what we consider to be unusual activity. An unusual activity is just when you start seeing huge, massive size. And if the size is not just something Somebody with 100, 100, 100, 100, and 100, and all of a sudden you've got a thousand options. I'm talking about somebody who walks into a trading pit somewhere, or now it's on the Internet, and they come in and they buy 5,000 of one specific strike in the options world. And that immediately makes me look at it and go, whoa, hey, now I got to pay attention to this one. And it's interesting because as you start to go into the day, it might start off with just, let's just say, gold. But all of a sudden you start to see a gold miner name starts to pop up, and a silver starts to move around, and you start to see all these different things happening. It gives us what we think is an advantage to be able to see, all right, well, there's somebody be out there. It doesn't mean they're right, but they're spending a lot of money on what they think is right, which is they think there's going to be movement to the upside.

They think that whether it's GLD or SLV or any of the miners or anything within that world of gold and silver and copper.

So in plain English, if somebody is buying a lot of calls, they think that it's going to go up. And on the flip side, puts, they think it's going to go down.

Exactly right. Yeah. So if they came in, and we see that a lot, too, on that have maybe made a big run to the upside, and if they've gone too fast, too quickly, they've made this giant move to the upside, some stock, whatever it might be. It could be IBM, let's just say. And suddenly we see a gigantic amount of puts being bought. There's one of two things going, is the first thing in my head is, number one, they're getting pretty bearish. They think IBM is going to pull back after a huge run that it's made. Or it's somebody who's buying protection. They've been in IBM from 140, and now it's trading 220. And there are somebody's out there and they decide, You know what? I'm going to buy the 200 puts because I want to protect this. It's my way of buying insurance. You buy insurance on your car, your car is only worth 50 grand, right? Or 70 grand, whatever it might be. But your option position or your stock position might be worth millions of dollars. So why wouldn't you protect that by buying the puts that would then protect you? Because if it goes fast to the downside, those puts start to have a lot more value to them.

You might have bought them for $2, now they're $4, now they're $8, whatever it might be, because if it was to continue to go to the downside, they're going to just move along with that stock or that entity.

How do we explain this? If we're just starting, Professor Najarian, in the school of options, what do we need to know? So it can be used as protection, can be used as insurance. Let's say you bought You know, 100 shares of Google, and you are worried that it's going to go down. So what would you do?

You'd buy one because one option, whether it's a call or a put, represents 100 shares. And on the put side, it would be selling shares. And on the call side, it would be buying those shares.

Okay, so in my very rudimentary knowledge of options, call up, put down.

Right. That's how I remember it. That's pretty much the best way to do it. Yeah, if you're buying, in both cases, That's exactly the way you do it.

If somebody's options curious, and so you have to start and you have to open an account, you have to get approved, would you suggest that that is a good first step?

It's a great first step. The next step is you got to get educated. I can't say it enough. Maybe you grab a book. John and I have written four. What we emphasize in those books is a little bit different. Each one has been tweaked a little bit, but it all comes right back to you got to be educated understand, because there are things that really could cost you a lot of money if you didn't understand it properly.

We appreciate you giving us the cliff notes here today. This is the cliff notes. Thank you so much. But top level, you can protect yourself or you can earn money, too.

Yes. The Oracle of Omaha has always said that he thinks that options are, what does he call it? They're the entity of mass destruction or whatever he says. Funiest thing is he's the largest trader in the world. So that makes it interesting that he says how negative it is, and yet he uses options more than anybody. But it's been interesting over the years, and he's very smart about how he does it. He will position into stocks through the options first, almost always, because you don't have to report options, but you do have to report stock. When you hit certain levels, you have to report, Hey, I own 5 % of Apple, or whatever it might be. He's an interesting guy, and I've met a lot of the people who have worked for him about his positioning and how he does it. But he starts off buying calls. Then eventually, he turns those calls into stock. Then he starts to buy a lot more stock then because the stock is already shifting around a little bit. But then he starts selling calls against his stock positions, which is a way where you're actually generating more capital.

You're limiting your upside, but if you feel like the stock is going to slowly move to the upside, and then you want to sell some calls. And worst case, it It means that he sold the stock at that level that he's selling those calls at with the premium that comes with that. So it's an interesting strategy. He comes in buying, then he comes out selling, and he's got very large positions, a heck of a lot of stocks. So after a while, I've gotten used to seeing him, and now he's retired. But I used to watch exactly. I'd say to John, I go, Hey, that's Buffett doing that. You can tell by the style and what he's doing and how he's doing and how he's positioning into it. And it's pretty interesting. And there's so many of the biggest of the big who are in the options world. And that's who we try to follow when we say unusual option activity or ULA.

For my 25 years covering this crazy, crazy, crazy It's still crazy. Crazy world. It's still crazy. I know that even Buffett, you have to be careful and decode what they're saying, why they're saying it, like talking their book or not, or do they have this position? And that's why you often disclose what you have and why If you're saying something. And if you're talking something up because you're long or you're short or whatever, there's usually a reason that somebody is coming out and talking about it that way. Even the Oracle, the goat. There's also some weird risque jargon in options. And I Without the lure, it's really, really risky, and sometimes risque, like single leg calls, naked position, straddle, strangle. It's like, What are we doing here?

That's fantastic. You just rattled that off. I love that. Well, if If you're doing an option naked, it means that there's nothing attached. I'm not trying to be funny or anything. It's somebody who came in and they just bought, let's just say for a number, 50,000 options, 50,000 calls. That's naked because they didn't do anything with stock. They didn't do anything with puts. They didn't do anything selling options. But had they came in and they bought 50,000 calls at 200 and sold 50,000 at 2010, now they've got on a $10 spread. Hedging themselves. Yeah, they're hedging. Yeah, exactly right. And they're just capping it off, and they're trying to put in less money to be able to make a pretty substantial amount of money if they put it on correctly. And that's really, I think, a really smart trade oftentimes, because it's really difficult to project a stock is going to go up $25. But if you put on a $20 spread, like we see all the time in certain names, like in Netflix, Apple, whatever it might be, they buy the 250 strike calls, and they sell the 270 strike calls. So it's a $20 spread, and they buy it for $5.

I like that trade a lot. I look at it and I go, Well, I like the risk-reward. I don't think it's really going to run past $20 in the next couple of weeks. So I like what this guy's thinking. I'm going to follow him.

Buying an option doesn't mean you're buying the actual underlying asset. And so there are opportunities. I don't know if I was mentioning this earlier when we were catching up, but I started Private Wealth Collective, which is a wealth management offering for our audience with no minimums. We were having a client call the other day, and this family has a huge concentrated position in one very buzzy, buzzy stock. We suggested a covered call strategy for them. I like that.

That's the most popular option strategy in the world.

Explain why that is and why it could be a good option. No pun intended.

Part of the reason I think that it exists as the number one is it's relatively simplistic. You're You're buying the stock, and so you own the stock, but you're selling a call, usually something that's a little bit further above where the stock price is at that time.

Let's say NVIDIA.

Yeah. So if it's NVIDIA, and NVIDIA is trading, let's say, at 130 or something like that, just as a number, I don't know.

I'm going to get higher, but sure, that would be lovely.

I don't think it's much higher than that.

I bought it at 40.

Good for you. Thank you so much. Wow, that's a great buy. So let's say you own NVIDIA and you own the stock at 120. If you sell the 130, so $10 out of the money, you're not expecting it to get up $10 in a fairly short period of time and you sell those for a dollar, you basically You basically take that dollar and put it in your pocket. Because unless the stock goes flying to the upside and you don't get a chance to buy what you sold back, now that actually is something you have to know where it's going to be able to take away your stock if you don't buy it back as it goes to $1. 30.

Okay, yes. So slower. One more time for the folks in the back. So I own a bunch of NVIDIA, and I want some income because who doesn't? What do I do?

So if you were to sell the options, now you're going to take those. And on a percentage basis, you are creating better than almost any dividend you could ever find anywhere. Because let's say you just sold it for a dollar and you did it every two weeks, you'd sell this dollar option because the market is a at a dollar fifty. And you're like, well, I already own the stock anyway, so I'll sell these for a dollar. So you sell them for a dollar and the stock doesn't go up all the way up there. So you don't have any worries. You put a dollar in your pocket. So you're creating your own dividend stream as you're doing this. And there are so many expiration cycles now. It's absolutely crazy because it used to be quarterly. There was an expiration cycle of there were quarterly options. Then it became, okay, well, there's the monthlies. Well, then all of a sudden it became, well, forget the monthlies. Let's just do it every Friday. Okay. And now we're starting to see where there's even more throughout the week expiring options. But if you were to do this every two weeks and you took in a dollar, and at the end of the year, you never had to worry about it because when you sold the options, you were able to buy them back for nothing, 10 cents or something like that, just to protect yourself.

But let's say you put a dollar in your pocket and you were able to do that once a month, every month of the year. It's not such a bad return. And you've created that by just selling something that other people were buying for the hopes that maybe that stock could come running up and go through there. So it's a lot more simple than most every other trade that you put on out there because it's very limited risk. The risk that you have is the stock goes shooting up to the upside, and then you, unfortunately, got stuck selling it at 130, and now it's trading 140.

But there are risks. It could shoot up. You could have limited upside, but you're not losing all your money.

Which is why it's so popular.

For just creating your own passive income stream for lots of folks. I would love to give you my phone, which I'm scared to do, and see what you do with my options account, which is on public right now. I have never traded options before, personally.

You should always do paper first.

Okay, so explain that. That's like when you were in grade school and they did the fake accounts.

Yeah. Actually, when John and I had a brokerage company called Trade Monster, it was the number one brokerage for a very long period of time. I don't know what our run was, but let's just say it was five years or something like that, six years. And eventually it went to ETrade, who then went to Morgan Stanley and whatever. We had a whole setup in there where it was just a paper trade. So a paper trade meeting a fake trade. So you go in and you say, okay- That's not as fun. Well, there's less risk, though.

I want to take some risk. Okay. So here's my call.

She put me in a bad spot.

Tell me what you see.

So I'm looking at this top.

Can we do something like very vanilla, like a V-O-O?

Or NVIDIA. Tell you what, the one that intrigues me probably most is your Microsoft trades. So tell me why. The stock itself is trading around 404, but you're going all the way up to the 625. So that's like a really long ways up there. But it is going out to January, so you get a lot of time. So Just so everybody understands a little bit more about the options, one of the factors of going in to price an option is what we call Theta, which Theta stands for time. So that's how much time does it have, because is this a two-day trade or is this like it actually is, a nine-month trade? Because you're going all the way to January of 2027. So that does, because there's that much time, that puts a lot more premium into the options that you're going to trade.

Well, remember in the tariff situation, there was a one day options trade that seemed suspicious.

Yes.

You think it was suspicious? Was it insidery?

Well, it sure feels that way. John always tells the story, it's not a pleasant story, but it's a real story, which was We saw an incredible amount of unusual options in the airline companies, American being one of them, right ahead of 9/11. So it just shows you that there's good and bad things that can happen in the market. And unfortunately, that was something where that was used in a bad way because they were buying puts, expecting the stocks to go down like they did. Wow. Yeah. There's insider trade because they were doing terrible things. So there's so many many different factors that go into these things. Who's making the trades? I mean, you've probably seen all these notes about all these politicians that are suddenly worth millions and millions of dollars. It's like, well, how did you do that as a senator? How are you now worth 40 or $50 million? That seems a little bit ridiculous because you didn't have that money when you started.

And there are all these apps that you can follow the trades, although there's a delay where they report and then it shows It comes up much later than they actually put the trade in. And so it probably already happened. How do they not get in trouble? If you're looking at this crazy options activity, the 9/11 breaks my heart even thinking about it, or more innocuous situation of the terrorists. How is somebody who's doing a one-day option, which is not... Can you explain that that's not a normal thing?

It's not normal, although it's becoming getting closer to being normal. But it wasn't normal, especially if you go back to a year ago, it was not normal. Now all of a sudden it's becoming that way because the options world is getting that much more interesting and people are getting more educated and they're getting now more involved. The one nice thing for some of these people, I think, if they're doing a one or a two-day trade and it's not dirty, they are doing it because it costs less. They think the stock is going to hop up because of the fact of whatever the fact is. It's not something illegal, but they're just saying, Hey, earnings are tomorrow. I think they're going to be great. I the stock is going to go up. So they buy a one-day option for tomorrow.

I mean, the volume is increased and also the access. The access, not excess, well, both. Access is increasing because of access that didn't exist. When you and I were just running the halls of the Sea Boat. Okay, wait. So are we putting in a trade or what?

I'm so intimidated to do that. I don't really want to do that.

You're like, This is the hot potato. Get it out of my face.

I just don't like the responsibility.

I appreciate it. Well, if you give people a sense, though, of what could happen to the upside, what's an example of the biggest return that you've seen from an option trade?

Yeah, the craziest ones, probably some of the crazier ones that we've seen of late have been in, and I mentioned those metals earlier. But if you look at silver, I mean, silver itself, just silver, was up like 170% last year, right? I mean, so in a year. So Pretty amazing. Now, it's pulled back significantly from that when it made that huge run. But I think following along and seeing that, that was amazing. I think a lot of people for a long time didn't understand that it wasn't being bought for the same reason you buy gold. Because you buy gold because you're looking for an asset that's something more, I guess you'd almost call it reliable or whatever word you want to use. Whereas silver, yeah, it's a precious metal, but that's really not why people buy it. They buy it because it goes in everything. It goes in your phones, it goes in your computers, it goes into EV cars, it goes into... I mean, take your pick where it goes. It's everywhere. So there's a lot of use for that. And you look at all of these various... I mean, when we say that it's in the semiconductors with the chips and all that, just give that a little thought of what are the stocks that we talk the most about over the last two years?

Chip stocks, AMD and NVIDIA and all these things, and all these other companies are all making their own chips now, even, and stuff like that. So the demand is there for silver, and it's just absolutely been an incredible run. Now, I think it needs to take pauses now and again and pullbacks now and again. But I don't see a slowdown yet anyway, because AI, everybody was saying, well, it's the biggest bubble ever, and this, that, and the other. And then all of a sudden it runs back up again, right? And then it pulls back a little bit, and then it runs back up again. So I I think that there's a lot of reasons to be interested in a lot of different parts of the market, whether that means the software stuff that everybody talks about and everything going on with data centers, with AI and those kinds of things. But it's also energy. I mean, look at what just happened in the last few days based upon what's been going on with some of the military things that have been happening. I mean, all of a sudden, you see crude oil, which can't get out of its own way, finally starts to springboard back up again in a big way.

I noticed it out here with your cost of your gas, by the way. They must have jumped it up right away as soon as the oil prices jumped because you guys are paying about 5. 50, I think, a gallon.

I have a Tesla out here, so I don't know what the prices are.

When I was riding over here, I did see a lot of 5. 50s and five and a quarters and stuff like that. In Minnesota, it's three and a quarter. So I just sit there going, That's pretty interesting, but it's pretty quick. And we were 275 just a couple of days ago.

So do you think we missed, if we didn't jump into buying gold or silver or copper or any of these metals, is it too late?

I can tell you that on a very consistent basis, we still keep seeing what we call unusual option activity. We still continue to see buyers of options that are indicating to me that they think they're still more upside. I'll give you a crazy example of one just a couple of days ago, last Friday. Netflix. They finally made the decisions that they weren't going to make this move, right?

From Warner Brothers.

Yeah, on Warner Brothers. And so I'm sitting there looking, and all of a sudden, I see some huge unusual options being bought, right? 50,000 of these, 30,000 of these, 30,000 of these. I mean, just very, very rapidly, bang, bang, bang, bang, Why are they buying that? And as I'm thinking about why they're buying it, I got a little bit smarter for myself, and I said, They're buying it because they think that the way it's going to unfold, it actually is much more... It's a better deal for Netflix. So somebody made that decision. It doesn't mean they're right, but that's what they did. And the stock is getting hit, so it doesn't look like that's right. Well, the one thing that as I was sitting there, I was thinking back to my days on the trading floor because I was thinking, Wow, when a trade like that comes in, I have to hedge it somehow, right? I'm on the bad side. As a market maker, you sell and you buy based upon whatever the numbers are. So somebody now is extremely short. Well, that's who the professionals are, guys supposedly like me. How am I going to hedge it?

I can't get enough stock to hedge it. So I just started looking and I said, well, they're going to have to buy options themselves to get out of this mess that they're in. And Lo and behold, all of a sudden, these things were moving all over the place because they needed to hedge this because their bosses at the end of the day, on a Friday, especially, are not going to be happy if they're short Netflix out the wazoo because they sold all these calls and couldn't find a way to hedge it.

Can't be naked on a Friday night.

Yeah, you do not want to go home naked like that. Yeah, that's for sure. That would be bad. But it's really been interesting to watch that one because it was all happening all at once. And I'm just sitting there going, they can't possibly hedge this. They got to either buy the world out of stock, which they don't want to do, or buy other options to cover what they needed to cover. So it was an interesting, great Friday afternoon of trading that was going on because you had the people who are happy to be sellers, but you also had the people who are frowning to be buying to try to hedge what they've sold.

They always sneak it in on Friday. They Also bad news and stuff. What do you think? We're on to you.

They do that, right? I mean, they really do. It's Fridays is when they do it, or it's over the weekend.

Who do you think should be trading options, or who shouldn't be?

Oh, that's a really good question. I would say this. The people that are curious and interested should definitely dig into it. But I would also say the people who shouldn't are the ones that aren't willing to get a full understanding of how the options work. Because the worst thing that can happen to somebody is they didn't understand that, Oh, if I sell the call, then that means that if this thing gets taken out, what if it's a biotech stock And they just willy-nilly sell an option, sell a call option, and the stock gets bought out at 50 bucks, but it was trading at 20 bucks, and they've cured cancer in blah, blah, blah. And so people are pretty excited about this biotech stock. And now you all of a sudden wake up and you're like, Well, wait a minute. I sold those for a dollar, and now they're trading at $30. And I sold 10 of them. So I've just lost a lot of money, right? You really have to do diligent work to understand it. And if you don't do that, I would say, Don't trade options.

Do you think it's true when people say it's gambling? Yes.

That's an easy one for me. It is a gambling.

So it attracts dopamine chasers.

It does, to some degree, for sure. It's funny because they hate when you say that. No one ever would ever want to hear me say that. But it's true. There's a lot of truth to it because you can stack it up however you want, and it's never going to be perfect. But you can stack it up, stack it up, stack it up, and then say, All right, how much am I willing to lose on this trade? I hear guys say stuff like that, and that tells me that it's a bit of a gambling thing. And it is. I mean, it's a gamble to decide because there's a time frame, obviously, for options that you don't have with stock. With stock, the stock is generally going to be there unless something crazy happens or whatever. They get bought or they go bankrupt or whatever. But if it's options, well, they expire this coming Friday or they expire the following Friday or however over, but there's a time frame for the options to end. There's a lot of reasons why I do think that there is a bit of a gambling feel for it. Long ago, I thought that we should put in a place in Las Vegas, where people could walk in there and they could buy a call on Microsoft or something like that.

I would go to that table all day long. Honestly, I do have a hot take when it comes to this gambling idea because people say trading is like gambling as if it's financial blasphemy. The odds are right on the wall. Show me a blackjack table where the odds are right there on the wall, and I will be sitting there day and night. It is just not the same as going to Vegas. It could be considered gambling, but it's very educated gambling in terms of what are the risks. You have all the information.

There is risk, and people have to know that. But I think, quite frankly, isn't buying a stock is risky, too? Selling a stock is risky. Buying a stock is risky. There's no promise it's going to go up.

Walking outside your door is risky.

Yeah. I know I answered that very quickly, and I surprised you with that, but I do think that there is something to be said for it's educated gambling. It just is, whether somebody likes to agree with it or not or whatever. It is. There is something to it.

Do you have rules that people should put in place to protect themselves? Like, don't put X % of your portfolio into one trade.

That's one. That would definitely be number one. I'll give you this one that John and I have talked about for a long, long, long time. When I pay a dollar for an option, okay? If that option goes to two sometime between a very short time frame or whatever, but whatever time frame it is, suddenly it's trading at $2. I take off half. Let's say I bought 20 of them. I'll take 10 off. I'll sell it at 10 of them. Now I got no risk, right? But I still have some sitting there.

So it's like if you bought a stock and it goes up, you're selling what the spread is and you're keeping your cost basis. You're not like, you're taking money off.

I'm taking money off the table, and now I still have something on the table, but it's basically free money now. Yeah, it's house money. I like that. On the negative side, because you always have to have the negative side, too. You started off and you bought something for $2, and now all of a sudden it's a dollar. I tend to think that that's time to say, I'm wrong on this trade. I'm going to get out, and I'll just try it another time.

It's not a good feeling. This is something I have to learn because I'm always like, You can do it. It's going to come back.

Well, and you never know. I'm not saying it's perfect. There's no a way that... I don't think there is a perfect answer, but I think that if you do that strategy, it gives you a really good opportunity to have some success, I think.

So it's easy for you to cut bait?

It's not easy. But you do it. I'm like you or anybody else. I mean, honestly, I paid $3 for an option, and now it's trading for a little over a dollar. I got to make a decision about what went wrong and just have to bite your lip a little and say, All right, I was just wrong on this one. The worst thing that happens is you do that, and then the stock goes-I know. Which is a terrible feeling. But every decision has some outcome, right? And it's not always perfect.

But there's this sunk cost fallacy, right? How do you talk yourself out of that? What goes on in your brain? Tell me, Pete. I know it's a scary place.

I think the greatest thing that football taught me was that somebody's going to lose, right? At the end of the game, Somebody loses. It's just the way it is. And you're hopeful that you're fortunate enough to win a lot more of those than lose them. I think I learned in a lot of the discipline that I have in trading really did come from my sports background. I got to come back another day for that one or whatever, whatever it might be. You just have to be disciplined and understand, All right, I turned out to have been wrong on this trade. I got to clean it up and I got to move on and not think about it again. I personally won't even look at the stock again until there's reason for me to look at it to make another trade in that stock. I won't look at it. And I see people who will stare at it all day long. I have a son-in-law, I love him to death, but when he has a bad trade, he will look at it all. He did everything right. He got out of the trade, and now all of a sudden, it went back up.

And I'm like, Well, how did you know that? Don't look at it.

Take it off your screen. It's like your ex. Delete their photos. Absolutely. I mean, as an options trader, do you feel like it's more offense or defense? My sports analogy is going to be limited. It was fine.

No, it was good. It was a good one.

But do you think you're more in an offensive posture or a defensive posture when you're trading?

I think more offensive. I see what I see at our market rebellion and stuff It's unusual option activity. I see it. I'll stare at it and think about it and then think, What is the catalyst? What could happen? Does this make sense? And if everything lines up and I do the trade, I'm okay with it. And I think that's more offensive. I think defense is what you play when you were wrong about it, right? And you've got to have that strong defense that says, Let's just get out of here and we're done with this one, and then move on to the next one.

Okay, last analogy. Who is your investing MVP?

You know what? This will sound sappy. It's probably my brother.

I knew you were going to say that.

Well, he's my older brother, and he literally- Guys are too cute. When I got to the trading floor in Chicago, he started in '81 after he was with the bears. And when I got there, he was considered by a heck of a lot of people on the floor as a big, tough, mean, smart guy who was king of the IBM pit. And so watching him as a guy who who's background was in graphic arts have success on the trading floor is absolutely amazing to me, right?

Both of you guys.

Yeah. And I was pre-med, so I did have a lot more financial-type things going on, like biology and chemistry. There's a lot of numbers that really do come into play in a lot of that stuff. But it's just interesting that he was so far away from it, being a graphic arts guy. I mean, he literally was a guy painting things and stuff.

I love that, though.

Yeah, I do, too. But for him to have the success that he had and has or whatever, but that he had when he stood on the trading floor. He literally just left the trading floor when I got there in 1992. He went upstairs and looked over everything. And I became the guy on the floor who was the risk manager for the whole firm. But yeah, a lot of fun. It's fun to work with my brother.

Can I be adopted?

You could be a younger sister. Thank you so much.

So we have a new game that I'd love to play with you. Speaking of games, I'll never play football, but this is a game that I hopefully can play called Secure the Bag. Okay. So I have this bag of money questions for you. Okay. And answer them. I'll answer with you if you want. Okay.

Have you ever hidden a purchase from a partner?

You can pass on one question.

I don't need to pass on it. No, I haven't. I know. I know.

We don't have to expand on it.

That could be too dangerous there. All right, so I'm grabbing another one. Have you ever cried over money?

Oh. I haven't seen these.

I've never cried over money. I've gotten angry over money that I've never cried over.

I think I've cried over money, but not in an investing sense. Sure. In a more personal sense or what the money represented. My house was foreclosed on when I was a kid. That type of stuff, I think, is money-related.

That would cause me to cry. I always knew there was another day. I try to be, and my wife always has been amazed by my even keel side of me or whatever, because if I have a great day, it's a great day, but it's the end of the day. So what?

What about happy tears?

No. I try not to go too high or too low. I don't really go low ever. And I go a little warm, but not too high.

I remember on the floor one day, a guy was so upset. Again, this was 25 years ago. Took a bunch of cash and just threw it And it was a weird vibe because I was 18 at the time. And so I was like, Can I grab this off the floor?

I hope he grabbed it.

But also it was taboo. Don't pick it up. He's really upset. Is he going to come back and get it? But also that's 100 bucks, so hook a sister up? I don't know.

That's classic.

But that was what that era was. A lot of big emotions, but more on the anger side than on the tears side.

What's your biggest money fear? Wow. That one's hard for me just because I'm not really sure I even understand fear marketing.

You don't understand fear, Pete?

I don't mean that in a cocky way or whatever.

I just don't- Oh, give me some of whatever you're taking.

It is funny. I got so used to... My background of where I went to school for junior high and high school definitely turned who I was into who I am. And I never even thought about it. So I didn't ever really think about fear and that thing and whatever.

I don't know if you want to share any of this. Of course, feel free to pass, but you lost your home in Florida.

That made me cry. No, I didn't cry, but it sure made me angry. We had two hurricanes back to back, came through, took our house that we had just finished. It was the last touches of the house in April and then in October. Custom. Custom everything. Dream home. 20 feet from the Gulf of Mexico. I mean, how do you beat us? It was great. It was our dream home for my wife and I. And she was the general contractor. She did it all. She made sure the guys were there because she didn't like the way it was getting run, the way it was.

Girl, I It was a pleasure, my heart.

Oh, my goodness. She had to go in and go like, Hey, let's get going, guys. But that was a tough one. That was brutal. It's still brutal because this is going on, and I think I told you, but August of 2027, I think, is when we're supposed to go to court with the insurance people. This happened two years ago. It's like, What in the world? How long can you stretch it out? But yeah, that one bugged me pretty good. But more angry than not a big sad guy.

I mean, every other answer is like a bunch of laughing, which I love. Sorry about that. Your amazing infectious cackle, which I love. So thank you.

Sorry.

No, it's an experience. So you're not fearful of rebuilding, or maybe your wife would have a different answer.

No, I think she's in the same boat with me. I mean, we basically made a decision as we're going to get this thing taken care of one way or the other, hopefully our way. I mean, that is what insurance is supposed to do. But we want an Airbnb. I mean, for instance, I'll tell you, I grew up early in life in the Bay Area, California. I still love it up there. I love it down here. I have friends in Manhattan Beach. I'm going to be with them tonight, actually. So I love it there, and I really love Manhattan Beach. So between those places and Tahoe and different parts of Utah and Arizona and stuff, I would much rather Wyoming and Montana. I literally would love to just do an Airbnb for two months or three months and then go back to Minnesota, where we want to always stay with our house that we've got there. But we love it. We really do love it up in It's a great spot. It's not for everybody because the winters are long, but it's a great city. The Twin Cities are really pretty fun. We got all the major sports and all that stuff, so it's pretty killer.

Yeah, we like it. To be clear, because one of the most searched questions about you, you're not twins. You and your brother are not twins. What?

I don't know which one that's good or bad for, right? Because he's six years older and I'm six years younger, obviously. But it's like, Well, either that's a compliment to him or a slap to me. I don't know. I don't know how to take it.

I think it's that you guys just are so simpatico.

Yeah. We've never had a fight, never had an argument in our lives. He was a mean guy when he was a kid, but past 16, he's been pretty good.

I'm so happy that I'm part of the family now.

Yeah, you're part of it. You can be a part of it. When you were a kid, did you think you would be rich when you grew I never cared. I don't know that I... Even to this day, I'll give you an example. If you said, Well, what do you mean you don't care? I drive a 2013 F150 pickup truck with 290,000 miles on it, and I really don't care. My wife and other people try to get me to buy a new car or whatever, and I'm like, Why? This thing's great. So the money part is- You and Lauren. It's just not who I am, I guess.

Rolling around in your old jalappies.

How about you? You didn't answer this one.

I definitely didn't think I would be rich when I was young. No way. Absolutely not.

What's your biggest money regret?

What's your biggest money regret? I don't know. No regrets? Because you move on so quickly from a trade. You have such a healthy mindset. Again, you guys need to bottle this.

The only money regrets that I probably over time, probably I have ever thought about was certain houses that when we were looking, we should have maybe bought this one versus that one or whatever. But my wife does a very good job of making a house a home type thing. It's pretty easy. We could live almost anywhere, really. Sure.

Again, woman after my own heart. Oh, my gosh. The show is not long enough for all my money regrets. But the biggest one is I wish I started earlier. I wish I started investing earlier. I don't think anyone... We had a billboard campaign for a minute that said, I'm I didn't invest earlier, said no one ever. Yeah. And what is next for you? There's a lot of pressure to be in politics. Minnesota, famous, sports-turned politico landscape.

A lot of people in Minnesota would love for me to explore the whole governor thing. So there's groups of very wealthy people who have reached out to me who asked me to potentially think it over, at least, if nothing else. And I've thought about it a little bit, and I've heard from, and I'll say, Jesse Ventura because he's a neighbor and a friend, and I've known him since he got back from Vietnam and all that type of thing. So he's been a friend forever, and he really would love the idea if I would do that. I don't know enough about... I don't think I'm a political guy. It's not really my deal.

Would you be a Republican?

Yes. He was an independent when he won, and so he would prefer that I did something like that. But I I'm not sure I'm going to take his advice on that.

No, you're out. It's a no for you, Doug.

Yeah, I don't think I'm... But yeah, that and the football stuff is interesting to me. There's a couple of different things going on that are really, really intriguing to me. And I've got some friends, the financial friends who have bought different franchises and stuff over the years and are always asking me about what would I do? Would I ever consider it? And I definitely have interest in considering it. So we'll see.

Buy a team, be part of a syndicate. I mean, there's so many finance guys that were such nerds growing up that they're buying a team and they're bringing in. Right.

Yeah, they need somebody in there. They're more on the football side. And if you look around the NFL, you can see which ones have more success than the others is the owners that actually do bring around the right types of people.

We end all of our episodes by asking our guests for a final tip that listeners can take straight to the bank.

Find Give the area in the market that you like best, that you think you know the best, and increase that knowledge, and take a shot. I think a lot of people just willy-nilly Sometimes we'll put money into something. It's like, give it a lot of thought. Give something that you know about it. I'll give you a crazy one real quick for me. Walmart. Everybody goes, How did you know to buy Walmart? And I'm like, well-You love shopping there? I I go there more than anybody. I go there and I see what's going on. And I see, especially during the pandemic, where there was a big change, and it's sticking. And the big change was people trading down. They're still there, and they're still at TJ Max. Those two places, TJX and Walmart, I feel like I know them really, really well. And so I feel like I have a pretty good comfort. But everybody's going to have something different, right? So find that. If you can find what you think you and you do know, you probably have a good chance of having success with it.