Options Made Easy

Many, many people, especially those looking to leverage their money, are attracted to options trading.  But is it really that ‘easy,’ as the title suggests?

I ask you to consider just a few simple items:

#1 – Options are not directly connected to the stock that they represent.   What I mean is that their price movements are not linear or equal.  For example, you might believe that a certain stock, valued at $30 per share, is going to go up in value.  You can buy 100 shares for a $3,000 investment and hope that they price does go up as you believe OR you can buy one option, thus controlling that stock for, say, 2.00/share or a $200 investment.

What can easily happen is that, over time, the stock DOES, in fact, go up to $32 in value.  You then go to ‘cash in’ your option and, guess what, you’ve LOST money!

The reason for this is that there are other market conditions that affect the value of that option, NOT just the price movement.

Learning how to read those market conditions and, especially, learning how they affect the value of your option can take quite a bit of time, money and energy.

#2 – Unlike stock, options can LOSE THEIR VALUE simply by the passage of time!  That’s right.  Place $1,000 into that old sock and bury it in the back yard and, when you dig it up 5 years later, it’s STILL $1,000.  But place a $1000 investment in an option and IT COULD EASILY DECAY IN VALUE, all the way down TO ZERO over time!

#3 – Options trading requires a lot more training and ‘trial and error’ than does stock trading.  This ‘trial and error’ is soft talk, meaning that you’ll likely LOSE MONEY while you learn.  Therefore, one should only trade options with money that one can afford to lose.

So, is there REALLY an easy way to learn how to trade options profitably?

No more than you can take a 2 week course and learn how to be a surgeon!

I don’t mean to pour cold water on anyone desiring to trade options.

Quite the contrary, my purpose is to inform you that while they say, ‘the stock market is risky’ and that ‘options trading is risky,’ what I’ll say is that the only thing that’s TRULY risky is trading options without the proper amount of training, mentoring and practice, practice, practice.

So, yes, pursue options trading.  I greatly enjoy it and am slowly becoming more and more profitable.

Just know that, as in anything worthwhile in life, there’s a price to pay.