Options Education Curriculum — Matt Hoffmann
Ground Rules (Non-Negotiable)
- Paper trade first. Robinhood paper trading or ThinkOrSwim onDemand.
- No naked options. Defined risk only until you've logged 50+ trades.
- Max 2-3% of portfolio per trade. Position sizing > picking direction.
- If you can't explain max loss in one sentence, don't open it.
- Log every trade. Win/loss, thesis, emotion, lesson. Review weekly.
Phase 1: Foundation (Weeks 1-4)
Week 1: Cash-Secured Puts (CSP)
Concept: Sell a put option. If stock stays above strike, you keep premium. If it drops below, you buy shares at a discount.
Why start here:
- Natural extension of your "blood in the streets" philosophy
- You already want to buy dips — CSP pays you to wait
- Defined risk: max loss = strike price - premium received
Paper Trade Assignment:
- Pick 3 stocks you'd happily own at lower prices
- Sell 30-45 DTE CSPs at ~0.30 delta (30% probability of ITM)
- Target: 1-2% monthly premium / capital at risk
- Log: ticker, strike, premium, delta, breakeven, "would I buy here?"
Key Metric: Annualized return on capital at risk. Aim for 15-25%.
Review Questions:
- Did assignment happen? Would you still want the stock?
- If not assigned, was premium worth the capital tie-up?
- What's your re-entry plan if the stock keeps falling?
Week 2: Covered Calls (CC)
Concept: Own 100 shares, sell a call above current price. If stock stays below, keep premium. If it rips through, shares called away at profit.
Why this matters for you:
- You hold TSLA since 2018 — likely large unrealized gain
- CCs monetize a position without selling
- "Income from a position I'd hold anyway"
Paper Trade Assignment:
- On a position you own (or simulate with paper shares)
- Sell 30-45 DTE calls at ~0.30 delta, 10-20% OTM
- Target: 0.5-1.5% monthly premium
- Log: what would you do if shares get called away?
Key Decision: Are you willing to let shares go at the strike? If not, don't sell the call there.
Review Questions:
- If called away, is your cost basis still profitable?
- If not called away, did premium justify capping upside?
- How do you feel about the "opportunity cost" of capped gains?
Week 3: The Wheel
Concept: CSP → if assigned, now own shares → sell covered calls → if called away, back to CSP.
Why this is powerful:
- Generates income in all three states: waiting, owning, exiting
- No directional bias required — just pick good stocks
- Your barbell strategy's "safe" end could run a wheel on blue chips
Paper Trade Assignment:
- Run a full wheel cycle on one ticker
- Document each leg: CSP, assignment, CC, exit
- Track total premium collected vs. buy-and-hold return
Key Metric: Total annualized return from premium + any share appreciation.
Week 4: Risk-Defined Spreads
Concept: Sell one option, buy a farther OTM option as insurance. Limits both profit and loss.
Types:
- Put Credit Spread (PCS): Bullish/neutral income. Max profit = net credit. Max loss = width - credit.
- Call Credit Spread (CCS): Bearish/neutral income.
Why this is your "options training wheels":
- Defined risk — you know max loss before clicking "submit"
- Lower capital requirement than CSP/CC
- Can express directional views without concentration
Paper Trade Assignment:
- 5 PCS trades on names you follow
- Track: credit received, max risk, breakeven, probability of profit
- Compare: spread return vs. CSP return on same capital
Phase 2: Income Generation (Weeks 5-8)
Week 5: Advanced Wheel & Rolling
- Rolling CSPs down and out when tested
- Rolling CCs up when stock rips
- When to take profits early (50% of max profit)
- When to defend vs. when to accept assignment
Week 6: Ratio Spreads
- Call Ratio Spread: Buy 1 lower strike call, sell 2 higher strike calls
- Asymmetric upside — fits your "moonshot" psychology
- Risk: unlimited above upper strike (requires management)
Week 7: Diagonal Spreads
- Different strikes AND expirations
- Sell near-term, buy longer-term
- Harvest time decay while maintaining directional exposure
Week 8: Collars
- Own shares + sell CC + buy protective put
- "Insurance with a deductible" — caps downside, caps upside
- Perfect for concentrated positions (TSLA insurance)
Phase 3: Advanced (Weeks 9-12) — Only if Phases 1-2 mastered
Week 9: Iron Condors
- Combine PCS + CCS on same underlying
- Profit from range-bound movement
- High probability, low reward — requires discipline
Week 10: Calendar Spreads
- Same strike, different expirations
- Play volatility term structure
- More complex — requires understanding of IV skew
Week 11: Straddles & Strangles
- Non-directional volatility plays
- Buy: bet on large move (earnings, events)
- Sell: bet on range-bound (high probability, defined risk)
Week 12: Portfolio Integration
- How much of total portfolio in options strategies?
- Correlation between underlying positions
- Tax implications (short-term gains, wash sales)
- Building a repeatable system vs. one-off trades
Weekly Structure
Monday: Review open positions, check earnings calendar, plan week's trades
Wednesday: Mid-week check — any positions needing adjustment?
Friday: Weekly log review, P&L tracking, emotion journal
Sunday: Read/watch one educational resource (see below)
Resources
Books:
- The Options Playbook — Brian Overby (structured, beginner-friendly)
- Trading Options Greeks — Dan Passarelli (deeper math when ready)
YouTube Channels:
- Tastytrade (tastytrade.com) — research-backed strategies, free
- Project Finance (beginner-friendly walkthroughs)
Practice Platforms:
- Robinhood (paper trading, simple interface)
- ThinkOrSwim onDemand (replay historical markets)
Success Metrics
Before moving to next phase:
- [ ] 20+ paper trades logged with thesis and outcome
- [ ] Can calculate max profit/loss/breakeven mentally
- [ ] Understand how delta/theta/vega affect your position
- [ ] Have a written adjustment plan BEFORE entering every trade
- [ ] No FOMO trades. No revenge trades. No "let's see what happens."
Risk Budget for Live Trading (When Ready)
| Account Size | Max Options Allocation | Per-Trade Max | Monthly Max |
|---|---|---|---|
| $50K | $5K-7.5K (10-15%) | $1,000-1,500 | $3,000 |
| $100K | $10K-15K (10-15%) | $2,000-3,000 | $6,000 |
| $250K+ | $25K-37K (10-15%) | $5,000-7,500 | $15,000 |
Start live at 50% of these limits for first 3 months.
Trade Journal Template
Date: ___________
Ticker: ___________
Strategy: CSP / CC / Spread / Other
Thesis: ___________
Entry: ___________
Max Profit: ___________
Max Loss: ___________
Breakeven: ___________
Probability of Profit: ___________
Days to Expiration: ___________
Adjustment Plan: ___________
Exit Plan: ___________
Outcome (fill after close):
- Closed at: ___________
- P&L: ___________
- Held to expiration? Y/N
- Emotion during trade: ___________
- Lesson: ___________
Questions for the Director
- Which position would you want to practice covered calls on first? (TSLA is obvious candidate but emotion may be high)
- Paper trading platform preference? Robinhood (simple) vs. ThinkOrSwim (more tools)
- Time commitment: Can you dedicate 2-3 hours/week to this? Options require more monitoring than buy-and-hold.
- Are you okay with capping upside on existing positions? This is the psychological test for covered calls.
Ready to start Week 1 when you are.