We’re just past the season where many high schools host dances where girls ask boys to the dance. In that same spirit, Tom turned the tables in this edition of Truth or Skepticism, asking the questions instead of answering. His theme? A financial literacy test for a potential advisor/money manager to be asked by customers, before investing.

If you needed to have surgery, wouldn’t you want to ask some questions of the surgeon before allowing them to cut you open? If you needed knee surgery and the surgeon said they would be cutting open your chest, would you allow him or her to operate? Why would anyone treat their money any differently?

Not everyone will be able to actively self-direct their own money. That’s a utopian vision and we understand that. For those that will not actively manage their own money, Tom compiled a list of ten questions intended to test the financial acumen of any third party money manager. If that advisor cannot answer these questions, then perhaps they are not the best candidate for managing your money.

Prior to being questioned, Dylan attempted to articulate what tastytrade is all about. If there were a thousand words or less limit for describing tastytrade, Dylan may have gone over the limit to the tune of three standard deviations.

tastytrade is dedicated to increasing the financial literacy of retail investors. How do we do it?

  • Explaining the benefits of investing where we can determine probabilistic outcomes
  • Showing how using options combined with volatility allows us to determine whether or not our probability of being profitable is worth risking capital
  • Showing investors how they can reduce cost basis through trading options

Out of the ten questions posed to Dylan, he correctly answered eight (I’m being generous). However, of the questions he missed, there was one that stood out.

When asked if selling a put is a good substitute for purchasing stock, Dylan’s loquaciousness was met with Tom’s parental disappointment look. We tastytraders know the answer only needed one word: Yes. We believe that selling puts in place of outright buying of stock increases our probability of being profitable by a dramatic margin.

Let’s cut Dylan some slack; he’s still learning. Or maybe he was too excited after learning Tom ordered a Tesla. Either way, it doesn’t appear he’s quite ready to graduate from being an apprentice just yet. But when it comes to handing your hard-earned money over to someone else, anything short of ten out of ten is like letting that surgeon open your chest for knee surgery.


Josh Fabian has been trading futures and derivatives for more than 25 years.

For more on this topic see:

What to Ask Your Money Manager | Truth or Skepticism: March 15, 2016