Thinking In Options with Bill Johnson

What are you really betting on when you trade an option? Bill Johnson argues that it's not simply whether a stock goes up or down. It's how much uncertainty the market has priced in—and how much actually unfolds before expiration. Using a roulette wheel that can change while it spins, Bill explains the difference between historical, implied, and realized volatility. He also shows why an option pri...

Does more active trading produce better results—or simply create more opportunities to be wrong? In this episode of Thinking In Options , Bill Johnson examines the illusion of control behind constantly entering, exiting, rolling and adjusting trades. Using probability, decision trees and casino-style games, Bill explains why even a 90% success rate on each individual decision can quickly become a...

There are no solutions in trading—only trade-offs. In this episode of Thinking In Options , Bill Johnson explains why options aren't simply a cheaper substitute for stock. Every option comes with conditions involving time, strike price, volatility, dividends, and changing exposure—and those restrictions fundamentally affect its value. Bill also examines the popular strategy of rolling a call to a...

Being right about where a stock is headed doesn't guarantee a profitable trade. In this episode of Thinking In Options, Bill Johnson explains why markets don't reward traders simply for predicting an outcome—they reward traders who recognize when that outcome has been mispriced. Using sports betting spreads as an analogy, Bill explores how expectations are built into stock and option prices before...

A 100% return on an options trade sounds impressive—but does it actually prove skill? In this episode of Thinking In Options , Bill Johnson examines one of the most seductive illusions in trading: mistaking leverage for ability. Options can generate extraordinary percentage returns, but those returns may say more about the structure of the instrument—and the risk being taken—than the skill of the...

What does it really mean when a trader says an option is "free" or they're "playing with house money"? In this episode of Thinking In Options , Bill Johnson breaks down the illusion of the "free option"—and why recovering your original investment doesn't mean the position you still hold has no risk. Using a simple call-roll example, Bill shows how traders can confuse cost basis with current market...

Volatility can make a stock look more attractive. Bigger swings mean bigger opportunities—or so it seems. In this episode of Thinking In Options , Bill Johnson explains the hidden cost of volatility and why two investments with the same average return can produce dramatically different results. Bill breaks down volatility drag —the mathematical force that erodes compounded returns as gains and los...

Most traders think they're "locking in profits" when they close a winning trade. But what if that's just an illusion? In this episode of Thinking In Options , Bill Johnson challenges one of the most common beliefs in trading psychology. Using memorable examples from casinos, blackjack tables, and even driving the wrong way down a one-way street, he explains why selling a position doesn't eliminate...

In this episode of Thinking In Options , Bill explains why "obvious" trades rarely exist, why attractive risk/reward setups aren't necessarily opportunities, and why successful traders focus on disagreeing with the market for the right reasons—not just following familiar patterns. If you've ever found yourself asking, "This setup looks perfect—why isn't everyone taking it?" this episode will chang...

In this episode of Thinking In Options , Bill uses a simple "basket of apples" analogy to explain why facts, indicators, and probabilities can create the illusion of an edge without actually improving your trading decisions. Just because information is true doesn't mean it's useful. If you've ever relied on chart patterns, RSI, Bollinger Bands, support and resistance, or historical win rates witho...

Most traders believe better chart patterns lead to better trades. Bill Johnson argues the opposite. In this episode of Thinking In Options , Bill uses an unexpected analogy—a roulette table—to explain why traders often mistake visual structure for real market edge. From chart patterns and support levels to option spreads and "high probability" trades, he explores how presentation can create confid...

Most traders love talking about percentage gains. A 200% winner. A 500% return. A trade that "tripled overnight." But are those numbers actually telling you anything useful? In this episode of Thinking In Options , Bill Johnson examines why percentages can be one of the most misleading metrics in trading. While percentage returns have their place, they often hide the most important questions: How...

In this episode of Thinking In Options, Bill Johnson explores one of the most overlooked questions in trading: Do you actually understand the indicators you use? Using the famous "five monkeys and a ladder" story as a framework, Bill examines how trading habits and beliefs can spread through the market long after the original reasoning has been forgotten. From MACD and RSI to Stochastics, many tra...

Most traders think success comes from learning the right patterns, indicators, and rules. But what if that's exactly the problem? In this episode of Thinking In Options , Bill Johnson explores a fundamental truth that many traders overlook: markets are not tests to be passed—they are competitive systems. Knowing the rules doesn't guarantee success when everyone else knows them too. Using examples...

In this episode of Thinking In Options , Bill Johnson explains why most traders are playing the wrong game. Using a powerful comparison between trading and golf, Bill breaks down one of the biggest misconceptions in options trading: the idea that success comes from "scoring" more wins. Instead, he argues that long-term survival and profitability come from minimizing mistakes, controlling risk, and...

Why do so many traders lose money on VIX trades — even when they correctly predict volatility? In this episode of Thinking In Options , Bill Johnson breaks down one of the most misunderstood concepts in options trading: how VIX options and futures actually work. Using a simple but brilliant weather forecast analogy, Bill explains why VIX contracts are not direct bets on current market fear — they'...

Bill Johnson breaks down "the dark side of the trade" — the hidden reality behind every winning position in the market. Why do so many traders believe patterns alone create profits? And if everyone sees the same setup… who's actually paying for the winners? In this episode of Thinking In Options , Bill explores: Why markets are fundamentally different from lotteries The zero-sum nature of trading...

Bill Johnson breaks down one of the biggest misconceptions in options trading: the belief that "cheap" options are low risk simply because the maximum loss is limited. Using casino analogies, probability theory, and real-world option structures, Bill explains why risk is determined by odds — not by the dollar amount of the premium. In this episode of Thinking In Options, you'll learn why low-price...

In this episode of Thinking In Options , Bill Johnson takes aim at one of the most repeated—and most misunderstood—ideas in trading: the "risk/reward ratio." You've heard it everywhere: "Only take trades with a 3:1 or 4:1 risk/reward." Sounds smart. Sounds disciplined. But is it actually meaningful? Bill breaks down why these ratios, on their own, are mathematically empty—and why traders who rely...

"You can't go broke taking profits." It's one of the most repeated phrases on Wall Street—and one of the most misunderstood. In this episode of Thinking In Options , Bill Johnson dismantles the comforting myth that locking in gains automatically makes you safer. Using vivid analogies—from notorious bank robber Willie Sutton to Wile E. Coyote—Bill explains why consistently taking small profits whil...

Is it really possible to minimize risk and maximize reward in the markets… or is that just another trading myth? In this episode of Thinking In Options , Bill Johnson breaks down one of the most persistent misconceptions in trading using simple—but powerful—auction-style thought experiments. Through three scenarios, you'll see how markets actually price risk, why "free money" opportunities disappe...

What if the "high-probability strategy" everyone is chasing… isn't an edge at all? In this episode of Thinking In Options , Bill Johnson breaks down one of the most dangerous misconceptions in trading—the idea that impressive results automatically mean skill. Through a satirical (but revealing) look at the so-called Lunar Phase Market Timing (LPMT) strategy , Bill exposes how easily traders can be...

Last week, Bill Johnson explored why entering spreads one leg at a time can expose traders to hidden dangers. This week, he takes the concept further with a powerful idea: risk never disappears—it migrates. Through a clever riddle involving a five-foot pipe, a bus, and a simple geometric trick rooted in the Pythagorean theorem , Bill reveals a deeper truth about markets—when rules or strategies tr...

Last week, we explored why LEAPS give you more time—but not more opportunity. This week, we take that idea deeper by uncovering a subtle but critical risk that many options traders overlook: legging into vertical spreads . On paper, vertical spreads are "defined risk" trades. But in practice, the way you execute the trade can quietly introduce a completely different kind of risk—one that has nothi...

Retail traders love the idea of LEAPS. More time, more chances, better odds—right? In this episode of Thinking in Options , we break down another dangerous trading illusion: the belief that buying more time creates an edge . Long-dated options are often treated like a loophole in pricing—"cheaper per day," "more time to be right," "four times the opportunity for only twice the price." It sounds lo...