 Hey everyone, welcome to another video lesson from NavigationTrading.com. In this video, I want to talk about what this tornado taught me about trading options. So last night in our area here, we had a massive tornado warning, actually tornadoes touched down kind of pretty close to us around us. And it was interesting to see the reaction by people that I know and by the media and the news and the weather stations about the tornado and the effects and the fear that was going around during this period of time. Now, granted, tornadoes can be dangerous. They can tear up property. They can kill people. They can do a lot of damage. So I get it. I'm not trying to be insensitive. I'm not trying to be unempathetic when it comes to this. But there's so many lessons in life that can also relate back to trading. And here's kind of the takeaways or here's the point of what I want to get across. And that is that fear is nearly always overstated. Does that sound familiar in trading? Implied volatility is our measure of fear. The VIX, the volatility index, also known as the fear index. This is a measure of fear in the markets. And so what happened last night was we were getting calls and texts and people were freaking out about this tornado that was coming close by. And the reality is, is that the probability of something actually happening was so low, but yet the fear of everyone around was so high. And I was having a conversation and I'm kind of like, what's the worst thing that can happen? Let's lay this out and let's really talk about this fear that's going on because of this tornado coming. What's the worst that could happen? Well, you could die, right? I mean, that's kind of the worst of the worst. And I said, you know, I'm okay with that. If it's my time to go, it's my time to go. I've led a great life. I've had an impact on a lot of people. Now, my kids, my family, I feel bad for them because, you know, hopefully they're going to miss me. But the reality is that that's the worst thing that could happen. And it actually, in my mind, the worst of the worst would be to actually get injured to a point of disability. So that to me, that would be the worst of the worst. Or one of my family members, you know, getting hurt or injured or killed is kind of the worst of the worst. But then we talked about what are some other scenarios? Well, it could tear the roof off our house. Okay, we've got a pretty solid foundation and kind of a place to hide from things like this. And so tears off our house. Well, guess what? I've got insurance, right? So the worst case, we have to build a new house. Is that really that big a deal in the grand scheme of things? Could we lose some of our memories and things in our house? Yeah. Is that a bad thing? Yeah. You think about that. You don't want that to happen. But at the same time, in the grand scheme of things, is that really a big deal? Or the other thing we talked about is we might get trapped in our basement, in our little hiding spot. And it would take a couple of days for people to find us. Is that really that bad a thing? I mean, I can think of a lot worse things that could happen. And the reality is it'd make for a good story, right? I mean, two days out of 10,000 days that I have to live, I mean, is that really that big of an issue? And so my point here is that fear that people have so many times is completely overstated compared to what the reality is in a situation. And it came through on the news channels. I mean, these newscasters were just pounding fear, fear, fear, fear into people. And obviously the reason they do that is because fear sells, right? The more people that watch, the more they can sell advertising, the higher they can charge for advertising, they are in the business of getting viewership. And selling fear is one of the best ways to do that. It's no different than in the financial markets. You turn on CNBC or Bloomberg or any of these channels. And 90% of what they're talking about is fear or negative things happening because that's what sells. That's what gets eyeballs on their screen. And that's what's going to drive their revenue. They are for-profit companies. They're not doing this out of the goodness of their heart or just to be kind of a public service announcement. They are doing it to drive revenue for their company. So this is an actual picture of the tornado. A friend of mine took this about 20 minutes away from where I was. And pretty nasty, right? This picture hasn't been doctored or photoshopped or anything. I mean, this is the real picture. Stepped out of his house, snapped this picture with his phone. So pretty crazy stuff. But as it relates to the market, let me pull up the platform and just look at the VIX. This is the volatility index. This is also known as the fear index. And just like what happened last night with the tornado, there was so much fear. By the way, I did hear that a couple people got injured. A couple property damages. But overall, just from a big picture perspective, not really that big of a deal. And it was really looked at as kind of a tornado situation or a storm that we hadn't seen in 20 years in this area. So the same thing happens in the markets. And this is all kind of measured by the VIX or the volatility index. And this pricing of the VIX is based on the S&P 500 options. And so when the VIX goes up, that typically means the market's going down. That means there's fear in the market. And so there's volatility in the market. And so just little spikes like this that we saw back here. And this is, I'm looking at 1999. So I went back 20 years just to look at this data. But any little spike like this. I mean, you turn on CNBC during a period like this. And the world's basically coming to an end in their words. Things are getting crazy. But then look, volatility contracts. Volatility goes overstated. And then it contracts. You can see all these little blips that just look like little blips on this chart. I mean, there was some significant volatility during these periods. And it's all based around fear and fear being overstated. And I was having a conversation last night during this whole tornado situation. I was saying, I love, I don't think I'm judging. I'm just saying, I love how fearful people are. You know why? Because that means that our methodology for selling options, for selling volatility, for the way that we trade, that'll never, ever, ever go away. Because of the fear that people have and because fear is always overstated, that's why the way that we trade will always be profitable over time. It will never, never, never go away. I mean, even if you look at, you know, the situation like we had in 2008, if I scroll ahead quite a bit. So this is October of 2008 right here. And so, yeah, we saw these huge spikes. We saw the VIX get as high as almost 90. But think about this. From October of 2008 to March of 2009 is when it bottomed. So literally just less than six months, it took for all that fear to basically, not that the fear was out of the market, but that's when the market bottomed and never looked back and continued to rally. And you saw the VIX and volatility just continue to contract, contract, contract, contract, because it had gotten so overstated. And so just take this lesson as you're going through life, as you're going through your job or your business or trading or your relationships. Fear is almost always overstated. And if you just step back and say, how does this fit into the overall, the big picture scenario? What you'll start noticing is that fear is always overstated. And what people freak out about can really, in the big scheme of things, in the big picture, really be relatively meaningless. And if you can learn to take advantage of that fear, and I'm not saying take advantage of people, but in the markets and trading, take advantage of that fear, sell premium, sell volatility. That's how you become consistently profitable over time. And if you have that perspective not only in trading, because it will definitely help you there, but have that perspective in other areas of your life, I've seen it over and over and over and been able to benefit from that one way or another. So hope that was helpful. Everybody have a great and safe time out there. Beware of the tornadoes. We'll catch you in the next video.