This Greek Philosopher Taught Me to Trade Options

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.
[Greece]

Alright, I know what you’re thinking. How the heck did a Greek philosopher teach me to how to trade options?

Well, if you’ve been a reader of The Deep Woods for even just a short time, you likely know that I am a huge advocate of cultivating and integrating all kinds of knowledge about the world — and not just knowledge that’s directly related to stocks, bonds, exchange-traded funds (ETFs) and options.

The way I see things, it’s important to cultivate and integrate knowledge from wherever you find it, including from sources such as pop culture, literature, science, religion, music, history, art, biology, psychology — and especially philosophy.

Doing so makes you a better, well-rounded human and I think it also makes you a better investor. The reason why is because the more you know about why you’re doing things, the better you get at actually doing them.

Still, what do I mean when I say a Greek philosopher taught me how to trade options? Well, to understand this, we must go back about 2,500 years ago to pre-Socratic Greece and learn about the man named Thales of Miletus.

Thales was a brilliant philosopher and one of the first real Western thinkers and scientists (although “scientist” wasn’t a term that was used at the time). He is best known for his thesis that “all things are water,” which we know now to be erroneous, but was a groundbreaking thought, given the scientific infancy of 6th century B.C.E. Greece.

Moreover, Thales was among the first thinkers to make hypotheses that were testable and falsifiable, both bedrock principles of scientific inquiry today, but absent among his fellow thinkers at the time.

According to the Internet Encyclopedia of Philosophy, none other than the great Aristotle identified Thales as the first person to investigate basic principles, the first to question the origins of substances and matter and, therefore, the founder of the school of natural philosophy.

Among his accomplishments was the successful prediction of an eclipse of the sun that occurred on May 28, 585 B.C.E. Although it’s not known exactly how Thales was able to predict this event, the most likely explanation is that he studied the solar and lunar cycles.

Yet still, what did I learn about trading options from Thales?

To answer that, we must realize that Thales was a philosopher and a man not particularly concerned with the accumulation of monetary wealth. And because of his lack of finances, he often was criticized by the elites of Athenian society. To prove the elites wrong, and to demonstrate the power of reason and natural philosophy, Thales did something that should put him in the investing history books.

Based on his study, assessment and knowledge of the Greek climate, Thales reasoned that there would be a particularly good harvest for olives one year. But rather than sit on this information, Thales had taken the next step and put deposits down on all the olive presses in Miletus over the preceding winter.

Thales basically cornered the market on olive presses for a small investment. Stated in modern trading terms, Thales bought call options on olive presses and paid a small amount for the right to control those presses (i.e., he paid a small premium for the option).

When his prediction of a bountiful olive harvest did indeed come to pass, Thales’ bet paid off handsomely. The boom harvest created heavy demand for the olive presses, and because Thales held a virtual monopoly on these presses, he was able to rent them out at a huge profit.

In my opinion, this was perhaps one of the most important events — not only in market history, but in the whole of human history.

The reason why is because Thales demonstrated that “science” and the accumulation of wealth really are connected. And, as the old saying goes, knowledge is power. He also demonstrated that if you know what your competition doesn’t, you will have a tremendous advantage over them.

It is for this life lesson, as well as the accompanying investing lesson of Thales and the olive presses, that we should be thankful for the man from Miletus.

I know I am thankful for him, as his foresight and virtual creation of the concept of options trading has allowed me to help investors make some serious profits. And that’s precisely what we have done in my Bullseye Stock Trader advisory service, as we’ve consistently banked multiple double- and triple-digit-percentage profits using a combination of buying the right common stocks along with out-of-the-money call options, at precisely the right time.

To find out more about my Bullseye Stock Trader service, simply click here.

Finally, the next time someone asks who taught you about investing, instead of saying something conventional like Warren Buffett, Ray Dalio or John Templeton, tell them about Thales of Miletus.

*****************************************************************

A Spacious Worldview

Like a righteous inspiration
Overlooked in haste
Like a teardrop in the ocean
A diamond in the waste
Some world views are spacious
And some are merely spaced

–RUSH, “Grand Designs”

If you want to take in the world’s ideas and be open to the prospects of an enlightened life, then make sure you strive to embrace a spacious worldview. What this entails is being open to the facts about the world, and open to persuasion by evidence and rational arguments. What it doesn’t mean is being closed-minded and dogmatic about the world based on a narrow, myopic or “merely spaced” worldview. By allowing yourself to be persuaded by facts, arguments and reason, you will be a better thinker — and therefore a better human.

Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.

In the name of the best within us,

Jim Woods

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