Ep43 - How the Stock Market Works - Fundamentals

Wealth Building With Options

Dan compares buying stocks to buying a dry cleaning business to demystify fundamental investing. Learn how value investors like Warren Buffett evaluate companies, and why understanding P/E ratios, earnings, and dividends can help you select better strike prices for your wheel trades.

Key Topics

• The dry cleaner analogy: why buying stock is just like buying a business
• P/E ratios: what they reveal when comparing competitors
• Intrinsic value vs. market price
• Earnings (EPS): quarterly vs. trailing twelve months
• Dividend mechanics and dividend yield
• Using fundamental metrics to set strike prices for wheel trades
• Why the market isn't as efficient as you think

Key Takeaways

You actually own the business. When you buy stock, you own a proportional share of that company's revenue—it's literally your money.

Dividend investors think backwards. While most people chase rising stocks, dividend investors wait patiently for prices to fall so they can lock in higher yields.

Price isn't value. The stock market often disconnects from intrinsic value—that's where opportunities hide.

Your fundamentals matter for strike selection. Understanding earnings and dividend yield can help you choose more strategic strike prices for covered calls and cash-secured puts.

Connect

Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com

Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars, and more: wealthbuildingpodcast.com

Subscribe on your preferred platform and leave a review to help more traders discover the show.

Disclosure:

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document

Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.

Trumpet
Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0

Wah Wah Wah

Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0

Dramatic Drum Roll

dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/

-- License: Attribution 3.0