In December 2008, the city of Chicago did something completely unprecedented…
It had nothing to do with the Curse of the Billy Goat or exhuming Al Capone’s body…
No, the city sold the right to charge people for waiting.
It leased all 36,000 of its parking meters to a group of investors for 75 years…
The price? $1.15 billion.
And it turns out that $1.15B for 36,000 parking meters is a great deal…
Because the investors made their $1.15 billion back by 2019… PLUS an additional billion by the end of 2025… and there are still 57 years left on the lease.
Chicago's mayor calls it the worst deal ever approved by a local government in America.
I'd call it a great lesson for trading options…
Because if you think about it, a parking meter doesn't sell parking spaces. It sells time.
If the driver pays upfront for an hour, whether they're back in five minutes or fifty, the money is gone.
So when the clock runs out, the meter keeps it.
Options work the same way.
Every option has an expiry date.
The buyer is paying for time, hoping the stock moves their way before the clock runs out. If it doesn't, the seller keeps the payment.
Traders call this time decay"… and it’s the market equivalent of the meter running.
And most investors spend their lives waiting.
Waiting for a stock to to climb to a price they'd sell at… or waiting for that quaterly dividend payment.
And they wait for free.
When I sell a put on a stock I'd be happy to own… someone pays me to wait for a lower entry price.
If the shares come to me, I sell covered calls… and someone pays me to wait for a higher exit price.
There's a trade-off of course… if a stock falls hard, I still have to buy it at the price I agreed, even if it's now trading below said price.
That's why I only do this on businesses I'd be glad to hold anyway.
And while Chicago's drivers will be feeding those meters for another 57 years… I’ll be getting paid to wait in my options positions (hopefully for just as long - that’d put me at 93 years of age)
So the question worth asking is which side of the meter you're standing on.
Oliver
P.S.
Parking at a downtown Chicago meter cost $3 an hour in 2008, today it's $7… time has a habit of getting more expensive.