The 7 Habits and Me

"You should only worry about things that are within your sphere of influence."


That's the only advice from Stephen Covey's 1989 classic, The 7 Habits of Highly Successful People that I still remember.  I believe it to be good advice, yet I cannot help myself.  I'm constantly tilting against windmills in an effort to 'help' others see things my way.

That's especially true when it come to using options.  There are still vast numbers of individual investors who don't know that options exist or who believe they are merely speculator's tools.

Newspaper articles and columns published within the past week have upset me once again.  At this time, I'm not going to mention the writer's names, but it's very disconcerting that well-respected, intelligent financial journalists are so unwilling to write about the benefits of using options.  Sure, the 'first do no harm' manta is important.  And it's likely that some newspaper readers would see the word 'options' and immediately jump in without having any idea as to what they were trying to accomplish.  And that would be unfortunate.

Yet far too many investors around the world were hurt in 2008 – and much of that pain could have been eliminated had investors only known that they had alternatives to the well-worn, prudent advice: diversify, diversify, diversify.  This method of risk management failed to help investors last year.  That demonstrates that diversification, by itself, is not sufficient.

Even now, one of my journalist friends writes about how diversifying didn't help last year.  My question is:  where's the follow-up article discussing how owning collars would have paid huge benefits?  Where's some mention that other option strategies could have been used to reduce losses during those very volatile markets – even if these methods wouldn't have completely eliminated those losses?

Answer: They are nowhere.  They do not exist. 

I know there's nothing I can do.  This is certainly outside my sphere of influence, but I still make the attempt to convince newspapers to present the idea of using options – as risk reducing investment tools – to their readership.


2 Responses to The 7 Habits and Me

  1. income trader 02/02/2009 at 10:05 AM #

    good morning Mark,
    I agree with your analysis regarding this issue. The fact that options, now more than ever, belong in the forefront of discussions regarding financial planning, investing, trading etc is being totally dismissed by the main stream financial media.
    I believe that this is possibly due to the fact that many industry professionals such as brokers, planners, registered supervisors and even compliance officers do not fully understand options. This lack of knowledge, ignorance if you will, is passed on to investors who are told “options are risky and you shouldn’t bother.”
    I believe the educational requirements for financial professionals needs to be revamped to include a more entensive and rigorous study of options. Only then will we see the benefits of options strategies really reach the investor level.

  2. Mark Wolfinger 02/02/2009 at 11:33 AM #

    It’s easy to hind behind the ‘do no harm’ philosophy.
    I’m with you. They not only don’t understand options, there appears to be no willingness to learn.
    It may also be a fear of being sued. If a planner suggests option strategies and the client makes risky trades and loses money, many of those clients run to their lawyers seeking someone to blame.