“Are you a big Warren Buffett, Peter Lynch kind of guy?” I asked.
It felt like a softball question. We had been discussing his affinity for dividend stocks; his preference for selling options premium over buying it; his penchant for investing in brands and businesses you know; and his scorn for the general category of non-GAAP earnings.
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And yet, after a pregnant pause:
“No,” declared Rick, unequivocal in his answer.
If you’ve ever visited our Options Learning Center, or our official Barchart YouTube channel, Rick Orford should be a familiar face already.
You might recognize Rick from his beginner-friendly series of options strategy explainers, or his more detailed deep-dive lessons for active traders.
Or maybe you’ve read his columns, where Rick walks Barchart users through his specific screening process to surface everything from cool-headed trade ideas on scorching-hot Micron (MU) to tried-and-true dividend stocks worth holding for a lifetime.
But whether you’re brand-new to Barchart or you think you know Rick Orford already, you should keep reading.
Because while our in-house options strategist might seem at first glance like your standard-issue income investor, my recent conversation with Rick highlights the value of digging beneath the surface to unearth the overlooked details.
Plus:
Bookmark this YouTube playlist to explore Rick’s most popular visual options explainers. Subscribe to our official Barchart Substack to receive bonus content from this interview as soon as it’s released, featuring where to invest now, Rick’s top tech stock, and his take on the SpaceX IPO.Now, for exclusive insights on options trading, premium selling strategies, how to navigate around earnings season, and the best Barchart tools to use, here’s our interview.
From Crisis to FIRE
Rick Orford: Growing up, I didn't really have a finance background. Actually the opposite.
I didn't go to university right away. Right out of high school, I was working, I started a business. I've always been very business-oriented or entrepreneurial. Probably because of my personality. I don't work well with bosses, especially bosses who make choices that don't align with mine.
I grew up in a family where money was always tight. We were never without, but money was always tight. And there was absolutely no financial education, ever.
The only thing I heard of is once in a while the utilities might get cut off or the Visa needs to be paid because it's too high. I'd hear things like that. I'd hear the crisis, but I would never hear anything about how to solve it. And that lack of education followed me into my 20s.
Now, as I mentioned earlier, I've always been very entrepreneurial; I've always been business-oriented; I've always been good at making money – but up until my mid-20s, I was terrible about spending money. So I was spending way more money than I was earning.
At the time, I was in my communications company with my partner, and I had, you know, mutual funds, I had ETFs – I had some investments. I knew enough about them, but I didn't really know a whole lot. But I was still spending more than I was earning, and at the end of every month I didn’t have any more money. I kept borrowing from my home equity line of credit just to make ends meet. It was crazy.
And I don't remember specifically when it was, but I remember one day I just said, “Enough is enough. We have to turn things around.”
So I started learning about money. I learned about the FIRE [Financial Independence, Retire Early] movement. I learned about spending less than you earn, and investing the rest – and doing that consistently, not on a lump-sum basis.
And that's where everything turned for the better. I started to learn to live within my means, and not care about, you know, buying a new car every year because it was bigger or better or anything like that. So I didn't have to keep giving myself salary increases to support my lifestyle. That was really the key.
And I learned that in my 20s, thank heavens, because it could have been disastrous if I had not.
Investing vs. Trading
RO: In terms of stocks, I’m a terrible trader, but I am a very good long-term holder. So, I'm very good at holding stocks for 10-15 years. In fact, I have a lot of stocks that I've held for around 15 years, and that includes those in the Magnificent Seven.
As a short-term trader, I get far too involved in buying and selling, and it just doesn't make any sense. So that's why I will almost never talk about anything as a short-term trade, even in my own community. They're always asking, “Hey, Rick, how do we make some money this week?”
No. It doesn't work that way. Think about five years out. Think about a good company with solid fundamentals who's making money, who's growing their earnings quarter after quarter, year after year. Find one of those.
Start with your wallet, open up your wallet, find out what are the names inside your wallet? And then extend that. What are the names inside your house? What products do you buy every day? Procter & Gamble, Unilever, Coca-Cola. Things like Visa, MasterCard, Amex; companies like that.
Are you using Google every day? Great – buy Alphabet (GOOG) (GOOGL). These are the companies that I learned to own for the long term. And it's done very well for me.
Elizabeth Volk: Are you a big Warren Buffett, Peter Lynch type of guy in terms of philosophy, would you say?
RO: No. I mean, I consider them all, I read them all. Warren Buffett has traditionally been in oil, railroads, deep industry – and that's something that I don't know a lot about. It's just not my wheelhouse. I like tech stocks, especially in this cycle.
Of course, what Warren Buffett is doing, as he gets older, is handing the reins to others to manage the portfolio, and it's becoming more tech-forward. And I think it's just modernizing it.
But we cannot forget the returns that he's had over the last, I don't know, 60 years. It's incredible.
So is there any one particular investor now that I follow? I like to read everything.
EV: There's a lot to take from a lot of different perspectives, I find – there really is.
RO: And it's just like trading styles; everyone will have their own way. What it comes down to is having a repeatable process.
Trading in 3 Dimensions
RO: Companies release earnings; they release new products; people buy the products. Hopefully, that shows up on the earnings report. Stocks go up; stocks go down; and that's it.
It's very two-dimensional, right?
But options trading… that's a whole other animal. Now you get kind of a third dimension.
Because in options trading, you've got a bunch of buyers and sellers who may or may not make a decision to either buy or sell a stock.
And then, when we pair different options together – your calls and puts, and whether you're buying or selling – then it gets even more interesting, because now you can actually shape your thesis as to which direction you want it to go. And you can do it with a lot of money, or you can do it with a little bit of money.
So there's money to be made there. And I usually say, “Stay till the end, stay till expiration.” Otherwise, the only exception to the rule is at the onset, if you set up those exit orders when you make your trade.
If you say, “Hey, look, I'm happy to take 80% of my profit and you can automatically get me out of this trade.” Or at the bottom, “Here's my stop loss. I'm willing to accept, say, 150% of the premium as a loss, and be done with it.”
If you set that up at the beginning of the trade, you're setting your boundaries, but then don't change those goalposts. Just leave it. And if you do that, I think the chances are far better to work in your favor, at least. That's what I found.
EV: Are you mostly an option seller, would you say, or a buyer?
RO: More interested in selling than buying, and probably more on spreads. Call and put spreads to limit risk and define that risk.
I know where the stock is going to typically trade. There's going to be a range. Kind of looks like a heartbeat, right?
If I’m buying a call, I definitely want it to go in that specific direction. But usually selling is where my comfort is.
EV: Yeah, it's hard to get time decay to really work in your favor as a buyer if you're holding for any amount of time.
RO: Right.
EV: If you could tell new options traders one thing to look out for – do this or don't do this, just a rule of thumb to look out for – what would you tell them?
RO: Stop treating it like a lottery ticket. Simple as that. It's not a lottery ticket. Your $10 call option that you bought could become $1,000 next week, but it could also go to zero. Who cares? You lose it. It's just a lottery ticket. But it's not a repeatable process.
And I think the difference between trading and investing is that investing is a repeatable process. It's something where your chances are more likely to be successful.
If someone were long on a call, I would probably suggest to them something that's very deep in the money, very deep, where you're getting 80 or 90 delta – something like that. It'll cost a lot less than owning the shares outright.
You can extend the time period, too. We’re talking about time decay – well, one way you can put that in your favor is to buy something that's a couple years out.
How to Navigate Around Earnings
EV: Are you watching earnings dates to see where you can capture that inflated implied volatility (IV) as a seller?
RO: I prefer not to. Actually, I like Barchart’s information, especially those new profit & loss charts that actually tell me when earnings are coming up, because I much prefer to avoid it.
Especially today – because remember, price is a lagging indicator, right? Like with NVIDIA (NVDA) recently, all of that hype is already built into the price. And then, all of a sudden, everybody gets surprised when the stock price goes down after a blowout earnings report. So I generally try to avoid earnings when trading options.
There is a caveat, though. Right after earnings come out, IV is going to come down. There's some opportunity right there, and it happens four times a year for every stock.
EV: How do you feel about the proposal to reduce the frequency of earnings reports for public companies?
RO: You know, I actually haven't heard much about it beyond that headline.
I can see why CEOs would not like to do it because the noise every quarter is heavy. The primary function of a CEO is to keep the share price high. A lot of people don't realize this, but that is their only job. So when the stock price goes down or it's under pressure, that is a direct reflection of the CEO's ability to do his job or her job.
So I can see how CEOs would not want to have to think about reporting four times a year because, I mean, really – every three months? Come on.
But it's a checkup, right? “Hey, does everything still look OK? Are we still heading in the right direction?”
I think making big decisions as an investor based on a single quarter’s worth of data is probably a little irresponsible. But looking at an annual report – now you've got a lot more data. It's a bit more of a gold standard, so to speak, if you're looking at fundamentals.
Do I agree with reporting only twice a year or once a year? No; too much can happen. And I think it might even be detrimental in the sense that there'll be more misinformation coming out as well. You've got a huge influencer market which talks about and moves stocks. If you're checking in less than four times a year, that leaves more room for misinformation to come to the surface.
One thing I'd love to get rid of is non-GAAP. I laugh in these earnings presentations when GAAP and non-GAAP are used interchangeably.
Rick’s Top Barchart Tools
EV: In terms of the Barchart site, when you're writing a column or filming a video, what page do you click on first when you're trying to get started to find an idea?
RO: So, where do I go first? I mean, it really depends on what I'm doing. But if I'm looking at the universe for a particular trade, the screener is among the best I've ever seen. Especially just starting with the default.
The default view is fantastic because it gives the investor the choice of the strike price. And then it doesn't give them too much extra, right?
The competitive platforms will show typically one single strike. Whereas with Barchart, you get a bit of a range. So you can actually consider, “Do I want more premium, or do I want to be more conservative?” That's the balance that we have to think about.
And I really try my best to avoid getting complicated, like overdoing the screener. There are certain indicators that I'll specifically look to. Moving averages is usually a good one.
Bollinger bands are kind of noisy, and it usually takes a lot of time before any changes show up in the price. But moving averages are better. Volume indicators are better. Volume is what's happening right now.
So more often than not, I'm in the screener first, unless there's a particular stock that I want to sell a spread on. And then I’ll go to that stock’s page and then scroll down to vertical spreads.
Usually it's a bull put.
EV: That's been a strong choice for, what? The last 18 years?
RO: Well, stocks over time usually go up. So, right, quite the trend.
But whenever you're selling options, you do need to watch out for your positioning. What a lot of folks don't realize is how much the maximum loss is, and what your exposure is.
Even with a limited-risk spread strategy, you can end up taking on quite a bit of total risk due to factors like position size and strike selection.
EV: Your zero-day condor video covers this concept really well. It's inherently a limited risk strategy, but you can manage it in a way that adds exponential risk if you don't know what you're doing.
RO: That was the martingale strategy. The idea that, “If I lose, I just double down.”
But then it turns into double down and double down and double down again. Eventually, nobody has unlimited money.
EV: Yes, that’s the opposite of how you’re supposed to react when you lose. You’re supposed to use a fixed percentage that scales back.
RO: Anyway, it worked until it didn’t.
EV: Like all the best things, I think – it works until it doesn’t.
RO: Exactly.
The Sweet Spot for Selling Options
EV: What is your preferred timeframe for options trading? Since you're not trying to make money this week necessarily, and you're trying to stay disciplined.
So if you're selling premium in a spread strategy, what are you looking at in terms of timeframe?
RO: 30-45 days is usually the sweet spot for selling.
But today, what I'm starting to notice is that those 45-day trades can typically exit profitable at around day 20, around half the time. So, this is something that I – so far it’s only anecdotal, but I'm going to start looking closer at that. You know, you sell 45 days out, you buy back at about 20.
I still suggest that if you're going to sell, you set your profit and your stop-loss orders at the start so that you let the robots do all the trading for you. Nobody has the time to be sitting there refreshing their screen and trying to make a decision for 45 days. It’s not possible. But you can let the robots do it.
So, and then at that point, you’ll probably see the same thing that I'm seeing anecdotally, which is that the actual hold time is probably going to be around 20 days – or maybe even less, if there's a lot more volatility or the right type of volatility.
If you're doing something like a poor man's covered call, as an example, obviously, that’s a completely different story. But in general, for selling spreads or just cash-secured or naked puts – or even naked calls if somebody were that adventurous – yeah, 45 days, in that vicinity.
And then, you can think about doing the automated sell after 21 days or so if it's profitable and see what happens. But I really like the profit and stop-loss orders right at the very beginning.
EV: You're a limit order guy?
RO: I don't have time for anything else. I really don't.
This interview has been condensed and edited for clarity. You can find more insights & analysis from Rick Orford on his own YouTube channel, on our official Barchart YouTube, and by following his author page.
On the date of publication, Elizabeth H. Volk did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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