Karsten Jeske is a well-known voice in the FIRE community, FIRE meaning “Financial Independence. Retire Early”. He runs the personal finance blog Early Retirement Now, and has written extensively about the financial aspects of planning an early retirement.
He retired from a corporate and academic career when he was 44 years old. In this interview, he shares his exact strategy to use options trading to boost his monthly income.
Watch Karsten explain how he trades options for early retirement
The video was produced with Streamyard – an easy-to-use and amazing tool for live streaming and recording.
A different approach to options trading
Most retail options traders try to make as big a return on their trading capital as possible. In fact, high return on capital is often a goal in itself.
Karsten Jeske has a very different approach to options trading. As part of the FIRE community, his emphasis was to save a significant portion of his income during the early years to build up a portfolio he could live off as an early retiree. Now that he has succeeded in retiring early, his focus is on preserving his capital to be sure he can withdraw what he and his family need.
For Karsten, options trading is thus a means to increase the annual return on the portfolio he already built. He is not looking for exceptional returns; rather, he is happy with a trading style that adds some percent of return on top of what he already makes from his sizeable portfolio of stocks, bonds, and other assets.
- If you like this approach, check out our interview with Christian Czirnich about no-loss trades
Why options trading matters for FIRE
The FIRE movement is built on saving and investing aggressively to retire early. But one of the biggest challenges in retirement is sequence of returns risk: if markets fall early in retirement, your portfolio may never recover.
Karsten’s approach adds another income stream — options trading — on top of a traditional index fund portfolio. Even generating an extra 1–2% per year can dramatically improve retirement safety.
Karsten’s options trading strategy
Karsten focuses on short-dated SPX options, using 1DTE (one day to expiration) and 0DTE (same day expiration) trades.
- Overnight puts: At market close, he sells puts expiring the next day. He targets small premiums (often around 20 cents), repeated every trading day throughout the year.
- Intraday puts and calls: At the market open, he adds more short puts and also sells out-of-the-money calls, filling up available margin without overleveraging.
- Risk management: He sets stop-losses to limit losses. He also avoids maxing out margin, keeping a buffer against overnight surprises.
- Results: Over 14 years, his strategy has delivered consistent income. On average, it produces around $90,000 per year from a $2.3M taxable portfolio.
Key lessons from Karsten’s approach
1. Small trades add up
Selling a 20 cents option contract may not sound like much, but repeating it daily creates meaningful annual income, according to Karsten.
2. Don’t underestimate sequence risk
Extra income streams can make the difference between running out of money and staying financially secure in retirement.
3. Realistic expectations
Unlike YouTube hype promising 50%+ returns, Karsten’s method targets 4–5% per year — steady and repeatable, not speculative. But as he uses his retirement portfolio as margin, this comes on top of the returns he already collects from his assets.
4. Suitable for larger FIRE portfolios
Because naked SPX options require significant margin, this approach is better suited for retirees or investors with substantial taxable accounts.
Who this strategy is best for
Karsten is clear: his style of trading is not for beginners. It works best for FIRE investors who:
- Already have a large taxable portfolio
- Want to generate additional cash flow without selling assets
- Have the time and discipline to manage daily trades and risk
For FIRE investors who are not yet experienced with options trading, Karsten recommends starting small and sticking to strategies with defined risk.
Covered calls are an accessible first step, since they allow you to generate extra income on stocks you already own while capping upside risk.
Another option is to use credit spreads, which limit potential losses by combining a short option with a further out-of-the-money long option.
He also suggests looking at trades with slightly longer timeframes — such as one or two weeks to expiration — rather than daily contracts, to reduce the need for constant monitoring.
These approaches make it easier to dip a toe into options while keeping risk under control.
- You may also like these videos:
Where to learn more
- Karsten’s blog: Early Retirement Now
- He also recommends this book:
- Robert E. Whaley: Derivatives. Markets, Valuation, and Risk Management
[…] Karsten Jeske: How options trading may supercharge your early retirement […]