Option Trading
Strategies
Option
Trading Strategies is a website sharing with you the
concept of option selling to the average individual
investor. It is our belief that the individual investor
has been deprived of not only a quality resource on the
subject of pure option writing but also a concrete
blueprint for how to sell options successfully. Selling
options for premium has been a favourite strategy of
professional and commercial traders for years. After all,
somebody has to be selling all those options to the
general public, who seem to have an insatiable appetite
for buying options all the time. More often than not,
these are the people making the real money in this
business.
Most brokers
or investment advisors, when asked about the strategy of
option selling, will give a response such as, “you want
to stay away from that. It’s too risky.” Yet, when asked
to explain the approach in detail, few can do a thorough
job. If the investment representatives from the industry
cannot explain a particular approach to investing, how
can the overall community of investors be expected to
understand the approach? “Option selling has unlimited
risk” is all that most investors know about the concept.
The term unlimited risk is enough to cause most investors
to cross it off their list of potential investment
strategies without further exploration.
Many
traders’ first experience with futures is in buying
options. This is because their brokers told them that
this was the “safe” way to trade. “Limited risk” is what
they are promised. Indeed, the purchase of options does
limit your risk to the amount of money that you invest in
these options. Unfortunately, most of the time, the
amount that you invest will be the amount that you lose
if you use option buying. The odds are stacked
tremendously against you. There is a very good chance
that your options will expire worthless. Maybe one of
your positions made money. You take what is left from
that profit and reinvest in buying more options. Now
there is good chance that those options will expire
worthless. Even if you manage to profit from a few,
eventually the chances are that your luck will run out.
When these options are all expired, you have lost your
money. However, somebody made money on those options.
Somebody took your premium and put it in his
account.
If you have
ever lost money buying options, imagine if you had made a
premium for every option you held that expired worthless.
Would you be ahead right now? You never had to pick
market direction. You never had to decide when to take a
profit. You never had to worry when time was going to run
out for your position. You wanted time to run
out!
Writing
options may not be the Holy Grail of futures trading but,
in our opinion, it’s the next best thing. The purpose of
our website OptionTradingStrategies.biz is to help you
gain knowledge on options and hopefully you will benefit
on the information you have learned
here.
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