Ever since my early days in the options market, I’ve noticed that there’s a certain negative stigma surrounding options trading.
Some traders take an elitist stance against buyers of options contracts (like me).
They think we’re degenerate gamblers and that the only way to make consistent money in the options market is to sell contracts.
But this is false. Just look at me. I’ve made millions in the options market and I don’t sell contracts or trade credit spreads.
Regardless, I think it’s important that we identify the three main reasons why some people fear options trading (and why you shouldn’t). Let’s get into it…
1. Options Contracts are Depreciating Assets
The first point I usually hear from options fear mongers is that options contracts are depreciating assets that often expire worthless.
This is no reason to avoid trading options altogether.
Most traders fail. Most companies fail. But you don’t hear these points made in critici.sm of common share traders on any given company.
The difference is this — with the high risk that comes with buying options, the possibility of HUGE REWARDS comes as well.
In my opinion, this is a pretty even trade-off. I’ll gladly continue to bet small and conservatively with the potential of hitting massive home runs in the options market.
Sure, my contracts can theoretically go to zero. But only if I mismanage the trade.
I now have the experience to avoid that outcome entirely.
Remember Tim Sykes’ #1 rule — always cut losses quickly!
2. You Can Lose Money Faster with Options
This criticism of options trading is a double-edged sword…
Yes, if you’re reckless and undisciplined, you can lose money a lot faster on short-dated options contracts than you can trading shares.
But you can also make 500%-1000% gains on weekly contracts. Again, it’s a trade-off…
What stocks go 5x or 10x in a week? Only equally risky penny stocks. It all evens out in the end.
The bottom line is this…
If you want to open your trading up to these kinds of UNBELIEVABLE gains, you also have to expose yourself to an elevated level of risk.
REMINDER: This is why I’m always stressing the importance of only trading the best setups!
As an options trader, you need to be more selective than common-share scalpers.
The setups need to be perfect — then it’s up to you to trade them to their maximal potential.
3. Options Trading is Complex
Most of the fear surrounding options trading comes down to a lack of understanding.
If you’re trading stocks, you only have to worry about volume and price.
Comparatively, options contracts are complex.
A variety of different factors influence the overall value of the contract…
Volume, open interest, implied volatility, and ‘the greeks’ all factor into the eventual fate of your calls or puts.
I think some people are just too overwhelmed by the complexity of these numbers to confidently trade options. But for those who are willing to learn how options trading works, the rewards can be incredible.
Trading isn’t for everyone — and options trading is reserved for even less.
WARNING: If you aren’t willing to study hard, you’re GUARANTEED TO FAIL as a trader.
But if you’re ready to study harder than anybody else, you could be one of the courageous few who succeeds as an options trader.
Which camp do you choose?