Option Trader Series #4 Rico Dilello

For today’s interview I am very happy to speak to Rico Dilello. Rico lives in Canada, he has over 30 years of investing experience. He graduated from university with a degree in Economics. He started his own business recycling wooden pallets & skids when he was in my his twenties. After twenty years, he sold the business and started a second career as a financial advisor. He officially retired in 2005, but convinced his fellow advisors to put money into an investment club which he still manages today. 

You can follow his financial blog at https://ricodilello.wordpress.com/

How did you get an interest in option trading?

When I was in my early thirties, I had a subscription to a daily financial newspaper and a monthly financial newsletter which had articles on option trading.   

What actions did you take to learn on option trading?

Back then there was no internet or business news stations to watch, so I bought financial magazines and books. I also took a financial correspondence course that had many chapters on option strategies. My broker never recommended using options, the commission fees on option trades were not worth his time. However, he was happy to take my orders and to answer any of my option questions.

What is your goal/ambition?

My goals have changed over the years. When I was young, I wanted to become wealthy enough to retire early. (Mission accomplished, I retired at 53) My goal now is to protect my capital, generate enough income so that I can leave a sizable portion of my estate to my children and future grandchildren.

How do you describe your style? Did this evolve over time?

I have been trading options for over 30 years so my style has become very aggressive. I started with basic level one option trading, covered call writing, buying puts & calls. Currently I am at highest level available for option trading. It allows me to use more option combination strategies. Plus the internet and low trading fees from discount brokers has made these trades more accessible and potentially more profitable.

How much time do you spend on trading options?

Time isn’t an issue because I am retired. However, I tend to spent more time during earnings season and less time during golfing season. I can monitor as many as 25 to 30 open positions in four different accounts in less than 20 minutes a day.  

How do you deal with the risk that comes with option trading?

Tough question to answer in a few short words. I believe that buying options is risker than selling options. The majority of options (60% to 70%) will expire worthless. Plus option prices are controlled by the big financial institutions using complicated logarithms so it is hard to find mispriced or cheap opportunities. To reduce risk, I will use option combinations like call or put spreads. (Buy a call at the money and sell a call out of the money) Some option strategies have a higher degree of risk than others. To reduce liquidity risk, I look at the open interest on the different strike prices to ensure my ability to get out of a position.

Plus, I measure risk differently than the average investor. I look at how much money am I risky rather percent lost. For example: Buying 500 Microsoft shares for $25,000 could generate a potential lost greater than buy 5 call options for only $1,500. I would rather lose 100% from buying the call options than suffering a 10% loss (-$2,500) on buying the stock

What tools/sites/blogs/podcasts do you read on option trading?

I use Yahoo finance to look at key ratios on individual stocks. Then I visit the “Big Charts” website to get some technical buy and sell points to determine what strike price I should pick for my option trade.  I use T.D. Waterhouse option research features to get an idea of implied volatility and open interest on the stock options. I watch “Options Action” on line or live on T.V. at CNBC.  They explain some very complicated option combinations in detail.

What is the size of your option trading account?

I will only say that all my family accounts include the ability to trade options. My investment club account whose members are all financial advisors has grown into the seven figure range over the past 15 years. As the principal trader, the club has generated positive returns 13 out of 15 years.

Where do you get inspiration for trades?

There are no shortage of media pundits offering buy and sell recommendations on stocks or sectors. Over the years, I have developed a research process that usually separates fact from fiction.  I do set parameters on each trade to ensure profits and hopefully avoid large losses.

How do you track your trades and P&L?

I use an Excel spreadsheet to track my taxable trades. I don’t bother using a spreadsheet for my tax sheltered accounts. My discount broker has on line features that provide monthly and yearly performance details on all my accounts. The table below has 3 options that expired worthless, one buyback for a profit and one loss from buying put options.

No. Of     Proceeds of Adjusted Outlays & Gain or
Shares Name of Corporation Year Disposition Cost Base Expenses Loss
5 Puts – Sbux 2015 $708.78     $708.78
5 Calls – Sbux 2015 $1,933.75     $1,933.75
5 Calls – Luv 2015 $838.78 $75.00 $16.20 $747.58
5 Puts – Luv 2015 $518.79     $518.79
3 Puts – Nflx 2015 $0.00 $1,320.00 $13.70 -$1,333.70


What is the worst trade ever you did?

Percent wise, I lost 100% on buying a call or put option.  Dollar wise, last year I lost $16,000 on a FedEx call spread.

What is the best trade ever you did?

I made $21,000 on a Google call spread. For my investment club account in 2015, I made over $50,000 from selling options that either expired worthless or that I bought back. Trades using call spreads & put spreads added another $45,000 in total gains for the club.  

Where/how can we follow your progress?

Screen Shot 2016-05-25 at 21.50.56

You can’t because the majority of viewers on word press are not interested in reading about option strategies.  It took me three years’ worth of quarterly meetings to get my investment club members comfortable with my option trades. Keep in mind that they are all financial advisors with years of financial work experience.





11 thoughts on “Option Trader Series #4 Rico Dilello

  1. I know I haven’t commented on this series, but I do find it really interesting! We’re still sitting tight with index investing, though. 🙂 I think if we had more time and if I had a bit more of a gambling temperament, it would be fun to use a little play money to explore options, individual stock purchases and dividend investing, but alas… that extra time is nowhere to be found, and if I do have it, I’m out hiking! 🙂


  2. Great series. I can’t say much about options trading but it was great to read the information. My husband and I are currently doing some index investing and dividend growth investing (DRIPS). Haven’t dabbled into options yet. Maybe some day.


    1. Step one is getting comfortable with investing. Once you are ok with buying individual dgi stock, options can be a nice way to earn income while waiting for the stock to reach your price. It is an additional tool to reach your FIRE number.
      Agreed, it comes with some extra hurdles to overcome. Hopefully, the series can help.


  3. WOW Impressive… Reading the numbers that Rico did (and lost)… And I am struggling at pulling the trigger on my first trade worth 30 dollars…. 😀
    Nice interview, as all the rest, it’s impressive to an option newbie like me to see the experiences that Rico had… 😛
    Ciao ciao


  4. hey ambertree,
    thanks for posting this interview. I didn know rico, but I think I will look at his blog. 🙂

    Rico, the numbers are awesome. The most impressive part is that you are trading options since 30 years.
    I think we can learn a lot from you! thanks for answering ATL`s questions.

    best regards


  5. This is a really great series and we like how you continue to share a wealth of knowledge from other bloggers. Rico is very impressive and we are certainly intrigued by his amazing accomplishments.
    We do like index funds where they are not as risky, buy maybe down the road we will take another look at options!


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