Imagine a man who has been promising his wife a trip to Italy for twenty years.
He knows where they would stay. There’s a little hotel overlooking the water that she has shown him more times than he can count. He has looked at the rooms, studied the restaurants, and worked out which month would be best.
He could afford the trip years ago. These days, he could afford to bring the whole family.
But he won’t get on an airplane.
This is a man who started a business with money he couldn’t comfortably afford to lose. He has hired people, borrowed money, and signed contracts that kept him awake at night. His friends would hardly describe him as timid.
Yet the thought of sitting six miles above the Atlantic is enough to keep him home.
So every year, Italy gets another year away.
One evening, his wife brings out the photograph of the hotel again.
“Should I keep saving this,” she asks, “or should we pick somewhere we can drive?”
It’s an ordinary question. She would probably enjoy either trip. But he finds himself thinking about how many times she has shown him that photograph, and how quickly he has found a reason to put it off.
For the first time, he starts asking questions about flying instead of finding reasons not to go.
He talks to a pilot. He learns what causes turbulence and what happens when the weather changes. Some of the things he feared turn out to be things he had never understood.
Eventually, he books two tickets.
He may still grip the armrest during takeoff. His wife may have to do most of the talking on the way to the airport. But now they have a departure date.
I think about investing in much the same way.
A successful investor can be remarkably comfortable accepting risk in something familiar. He may own a business, several properties, or a substantial stock portfolio. He knows that each can lose money, and he has made his peace with that possibility.
Introduce an unfamiliar investment, however, and he may dismiss it before asking the first question.
Of course, an investment deserves careful scrutiny. Learning more about it may give you sound reasons to pass.
But you cannot make that judgment if you never get past “I’ve never done that before.”
How many of your investment decisions begin and end with those five words?
The Modern Investor and Comfort Zones
Investors have had plenty of encouragement to stay with what they know. According to S&P Dow Jones Indices, the S&P 500 recorded 39 closing highs in 2025 and finished the year with a total return of approximately 18%. For someone who owned stocks through that advance, buying more of the same was an understandable temptation. S&P Dow Jones Indices
But September 2026 has brought a less comfortable set of headlines. Oil prices have climbed above $100 a barrel, renewed inflation concerns have put interest rates back in focus, and rising Treasury yields have added pressure to equities. Investors are again being reminded that the conditions supporting their portfolios can change. Reuters, September 10, 2026
Does that mean stocks are about to collapse? No one knows. An uncomfortable headline is no more reliable a sell signal than a record high is a guarantee of another good year.
It does, however, make this a reasonable time to ask how much of your financial future depends on the same few things going right.
You may own several funds, a collection of individual stocks, and a retirement account at another institution. If those accounts own many of the same companies, or depend heavily on the same economic conditions, the number of statements arriving in your mailbox can give a misleading impression of diversification.
Most experienced investors understand this. The difficulty comes when doing something about it requires considering an investment they have never owned.
Suddenly, the questions change. How does it work? What could go wrong? How would I know whether the manager was doing a good job?
Those are excellent questions. They deserve answers. Yet how often do we ask them with the same seriousness about the investments we already own?
Comfort zones aren’t always a bad thing. Understanding an investment before committing money to it is good judgment. But familiarity can also lead to complacency. An investor may examine every possible weakness in a new strategy while giving a familiar holding the benefit of every doubt.
“I may lose money,” he reasons, “but at least I understand why I lost it.”
Fair enough. But I can lose a bet on the Super Bowl and understand why I lost it. That doesn’t make football a retirement plan.
An investor may examine every possible weakness in a new strategy while giving a familiar holding the benefit of every doubt.
Looking Beyond the Next Winning Stock
The search for the next great stock has an enduring appeal. A company is changing the world. Its earnings could multiply. Buy it early enough, and perhaps your investment will multiply along with them.
There are fortunes that have been made that way. There are also a great many investors who discovered the exciting story after much of the excitement was already reflected in the price.
Even professionals find it difficult to improve on the market. S&P Dow Jones Indices reported that 79% of active large-cap U.S. equity funds underperformed the S&P 500 in 2025. That figure helps explain the appeal of index investing. It also suggests that finding a better stock picker may be a less dependable answer than investors would like. S&P Dow Jones Indices
For investors willing to broaden their education, option selling offers another way to approach a market.
An option seller receives a premium in exchange for accepting a contractual obligation. Depending on the position, a profit may be possible if the underlying market rises, falls, or moves sideways within a favorable range. The trade need not depend on buying an asset and waiting for it to appreciate.
The passage of time can help the seller as an option loses time value. But the underlying price and changes in volatility also affect the option’s value, and their effects can overwhelm the benefit of time decay. CME Group
Receiving a premium, therefore, is only the beginning of the transaction. Whether you keep it as a profit depends on what follows, including trading costs and any losses incurred in closing or settling the position.
That distinction matters. Describing option selling as a way to produce income “regardless of market direction” leaves out the very thing an investor most needs to understand: which market moves can cause losses, and how large those losses could be.
What Buffett Actually Demonstrated
Warren Buffett provides a well-documented example of an investor willing to consider option writing.
In Berkshire Hathaway’s 2008 shareholder letter, he described long-term equity-index put contracts for which Berkshire had received $4.9 billion in premiums. He also reported a $5.1 billion mark-to-market loss on those contracts at year-end. Both facts belong in the story. Berkshire Hathaway, 2008 shareholder letter
Berkshire’s contracts had unusual terms and very long maturities. They were materially different from the shorter-term, exchange-traded commodity options an individual investor might encounter.
What interests me is Buffett’s willingness to examine the transaction. He considered the premium, the obligation, and Berkshire’s ability to carry that obligation. An unfamiliar strategy deserves that kind of examination before it is either embraced or dismissed.
The same standard should apply to a commodity option portfolio.
Taking Diversification Beyond Stocks
Commodity markets give an investor other things to study besides corporate earnings and stock valuations.
A coffee crop depends in part on growing conditions. Natural gas demand changes with the weather. Grain supplies depend on acreage, yields, and how much buyers are willing to purchase. These markets have their own commercial activity and supply-and-demand problems.
For an option seller, those differences can create opportunities to evaluate premiums in markets beyond the stock exchange. The question might be how far a commodity could reasonably travel during the life of an option, and whether the premium adequately compensates the seller for taking the other side.
There is still plenty that can go wrong. Weather changes. Supplies are interrupted. A market can move much farther than an experienced analyst expects. Commodities can also fall alongside stocks during periods of economic stress. Different markets do not guarantee independent returns or protection from a stock-market decline.
This is why the construction of the position matters as much as the opinion behind it.
A vertical credit spread combines a sold option with a purchased option at another strike, establishing a defined maximum loss for the intact spread under its contract terms. Other spread structures may leave uncovered exposure. Simply putting the word “spread” in a trade’s name does not establish that its risk is capped.
Anyone considering a managed option-selling account should understand those differences, along with the manager’s use of margin, position sizes, trading costs, and approach to reducing exposure when a trade goes wrong.
These are practical questions. You don’t need to become a commodity trader to ask them, but you do need satisfactory answers before committing capital.
Taking the First Step
For the man imagining that trip to Italy, the first step was learning enough about flying to make a decision he had spent twenty years avoiding.
Investors can begin in much the same way. Read about a strategy. Examine how it has behaved during difficult periods. Ask the manager to explain a losing trade as carefully as a winning one.
You may conclude that a particular investment doesn’t suit you. Your need for liquidity, tolerance for losses, or other financial commitments may rule it out. That is a perfectly reasonable outcome of doing your homework.
But if you have been putting off the homework simply because the subject feels unfamiliar, consider what that habit may be keeping you from understanding.
As we head toward the final quarter of 2026, you have an opportunity to review the portfolio you actually own, including the risks that have become easy to overlook. If professionally managed commodity option selling is something you have wanted to understand, The Option Selling Solution is a place to begin. Read it with your questions in mind, then decide whether a conversation about an account belongs on your calendar.
The man in our story didn’t have to become a pilot to take his wife to Italy. He did have to stop letting an unanswered question make the decision for him.
Regards,
Justin
Risk disclosure: Futures and options trading involves substantial risk of loss and is not suitable for all investors. Leverage can magnify losses, and losses may exceed the funds deposited. Uncovered option selling, including uncovered exposure within certain ratio spreads, can involve virtually unlimited risk. Defined-risk spreads can still lose their maximum amount at risk, and commissions and fees affect results. Premium received is not the same as net profit. Diversification does not guarantee a profit or protect against loss, and past performance is not necessarily indicative of future results. Any allocation should be based on an investor’s financial circumstances, objectives, experience, and ability to bear losses. Review the applicable disclosure document before investing.
