I have thought of a model to mentor options traders, that I would like to share for the purpose of critique and sharing. Instead of charging for mentoring time, the idea is to share profits as a compensation for time/expertise. The model is most likely new, but would be interested to know if you know of anyone using it. The process goes as follows: 1. First make contact with potential client via Google Chat during the day where I would give trading orders live. It is first tested without money from the client (but using my money to show that I am doing what I issue in real-time). 2. A second step, if potential client becomes client, is to trade live where the client places his trades in his account. Profits are split, until a given level of tuition is reached. 3. If client, during or after step 2, wants that I also consider managing a part of his capital, then I could consider it. Benefits: 1. To the client it will be education with a proof, and a payment from return on trading capital. 2. To mentor: income from mentoring and the satisfaction that he has earned his money because it is earned from profits. Mentor may also be able to manage funds, and/or later teach the clients more methods as they would then know that the mentor is for real and they would have the money to pay for the education. Tests: I am testing this with a friend, and also applying elements from the above process with an ET member and friend and business partner. In case of the ET member, it is not for teaching purposes but for making money for both of us. Your input: What do you think of the above model? Please provide critiques, additions, etc. Do you know of anyone who is using this model? Updates: So far with the ET member, we traded the market since last Thirsday (Five days in a row). We made money on each day---Five days in a row. Thank you! Notes: If there are insults in responses, the insulting poster will be ignored using the ignore button. I will NOT report such offenders to moderators.
Hi riskfree. I think when teaching people your trading style and splitting the money so he can pay for his tuition can make the student lazy (just my opinion off course). There has to be some drive to make this work. I think it would be better to teach him step by step what you do and show him how you do it. Webex for example is a good piece of software to share your screen with the student ( a picture can tell you more than a thousand words). You can show him or her your trades live on your screen and explain why you took the trade. After x amount of time you can switch places and let him explain to you why he wants to take the trade. Let him take the (paper)trade and after the trade is closed give your view on it and ask questions again based on what you taught him. Its very important that the student learns to think for himself as quickly as possible. Just my 2 cents.
I'm glad you are testing this on a friend. I think it is a good idea. Make sure you get an attorney to draw up a proper contract and an enormous insurance policy before you do this with a stranger. People do sue those who give them financial advice, and no matter how many disclaimers you make them sign in advance, some of them actually win.
Hi Dutchman: Very valuable input. Thank you. Do you please know how it is set up, etc? If you have experience and pointers to information on how to do it, it would be really helpful. I appreciate it. To your profits!
Hi Dr Cha, Your bring up an excellent point. Lawsuits are indeed something I knew it might be an issue but have not looked at it in depth. Do you pls know whether doing business via an entity shields the person (me or persons I would hire to do some or all of the work on behalf of the entity)? Any experience you have in this area will be helpful. Thank you
Any client of yours would probably want to make sure that you have what it takes. If you do not have a performance you can show, don't bother there are 1 M of people like that. You want to mentor and that's noble...I guess, but where is your performance for the last 3-5 years ?
Thanks for your comment. I would like to point out that I am here to seek input on the model, and not to offer services, but your comment is appreciated. In case you may have not considered it, performance records are not safe, because the mentor can pick and choose, the record may be the record of someone else, and most importantly you can actually reproduce a stellar performance by trading an account under your name against a second account (also under your name). You trade both accounts in way that it serves essentially to move money from one account to another. In net, you do not lose (except commission), but one of the accounts will be a big winner. So the idea of a trading record is flawed. The real record is the tax filing record, and it has to show that taxes were not offset but paid in dollars. No one would show you his tax record, for the aim of a business relationship of a few $K. The model was aimed at actually not having the track record needed because the mentor will do it in real-time with the customer with no charge. The customer will be tasting the soup, rather than seeing the mentor in some nice cook clothes in a nice upscale restaurant pointing to his cooking abilities. The model above tries to implement "The proof of the pudding is in the eating" idea. You taste the pudding, if you like it you order and eat, if you do not, you pass and do not eat.
Are you saying that you would pick the record of someone else, is that what it takes to be a mentor now ? There is not much to choose either you have a record for the last 3-5 years or you do not. In the end it is still about whatever you can make money or not, everything else is irrilevant. There is no need to explain anything, or to make excuses. If one can not make money he'll keep talking bla bla bla..., but if one can make money one can prove it, it is as simple as that.
Risk-- The real show of commitment by the mentor to the client would be to share the wealth (the profits) and also to share the agony (the losses). Otherwise, you are just playing with other people money under this âmentorshipâ. ~Bben
Bben, thanks for your the positives in your response. I agree with your model, but it is not mentoring, it is partnering. In a partnership, I have a model even sweeter. I take the first 3% losses of the partnership on me, in addition to my time and expertise. I split the rest of the losses 50/50. So you get a better deal than your deal. But the partner should not expect mentoring, as it would be unfair for the mentor to give something and get nothing in return. If you have the capital and interest in your own deal, I have the bonus 3% for you on top of your favorite terms. If you find the 3% not an incentive enough, I can even up it depending on the money you want to put in.