Reason 1: All professional traders know and use the options. They make a very comfortable living. Isn't that a great reason? They do not trade stocks but options. Why not imitate the pros? Reason 2: When you want to take a position on a stock, you have only two options, buy it or sell it. In both cases, I will surely surprise you but you are not 50% likely to be right but just 33%, why? You decide to buy a stock: - First, the action goes up, you are a winner. - Second, the action is stagnating. You are blocking capital on a security that does not perform. You’re wasting time and money. - Third, you guessed it, the value goes down and that's the insured loss. So you’ve got a 66% chance of losing money on a stock. Reason # 3: The options allow you to be right even when we are wrong in the direction of the action. With the options, I increase my probabilities to 80% success rate. Figure provided by the Chicago Board Options Exchange (CBOE). The stock market being only a question of probability, I prefer to have 80% than 50%. Not you ? Reason 4: The maximum risk is known in advance for each position. I don't know where the action is going, but I know what I can lose the most. Risk is the only thing I can handle. How many amateur traders do not know what it will cost them to take a stand if the action does not go in the desired direction? Who has never had a protective stop executed at a very unfavorable price due to a downward gap at the opening of the markets? Reason # 5: You think an action will go down. You want to sell it short (VAD). I know that selling stocks you don't own is a little bit of a concept for beginners to understand. Don’t worry, we’ll explain. You’ll see with the options, it’s much easier. When you make a VAD, you have to pay loan interest to your broker. So it costs you money. If the stock does not go down but explodes upwards, your loss will be unlimited. You will therefore have two losses. With options, I know my maximum loss and I don't pay interest. Reason # 6: You are buying 100 Microsoft stocks today because you think the stock will go up. You have to pay $ 95 x 100 = $ 9,500. With an option, I can have an identical bullish scenario without investing $ 9,500. I can play the upside over a set period of time by investing just a small amount. I buy a CALL with a maturity of 2 months for $ 300 for example. I will control 100 Microsoft titles. I only risk $ 300 instead of $ 9,500 and keep the rest of my capital for other strategies. If the stock does not go up, I will only lose the $ 300 or a very small part of my capital. Reason 7: When you buy 100 Microsoft stocks, you have to pay around $ 9500. You will control the same number of MSFT shares with only $ 300 of investment with a CALL. This means that if you wanted to invest $ 1,000 in Microsoft, you could control 300 stocks. Reason 8: In a long-term bull market like 2016-2017. The only way to take a position is to buy stocks. If you are afraid that the market will start falling again, you place increasingly tight STOP LOSS to protect your positions. The danger is that the STOP LOSS will be triggered at the slightest bearish jolt and that prices will rise just after. This often happens because institutional investors have a larger view of the order book than yours. They sometimes have fun getting STOPs a little too close. Prices rise just after. Balance sheet, you no longer have your actions and you have lost your risk. With a PUT option, I can very well buy insurance or I will be sure of the sale price of my shares. I will not be triggered at the slightest gust of wind on the market. I will be sure of my sale price set by my PUT on the due date. The advantage is that when the market turns occasionally but keeps its upward direction, I keep my titles. Goodbye untimely triggers and rebounds that make you turn green with rage. Other good news, since I am still the owner of the securities, I continue to receive dividends. Reason 9: A stock moves in a tight price channel. To profit from the market, you try to buy when the stock hits a support and sell when it hits a resistance. With the options, it doesn't matter the direction of the action. If the action wants to move in a price channel, no problem. I have a strategy for this. I will cash my premiums without spending my time in front of the screen to buy the supports and sell the resistors. Reason 10: How do you protect a position or your portfolio on the equity market? Apart from STOP LOSS, unfortunately there are few solutions available to you. With suitable option strategies, I can put in place combinations of options that will protect a security or my portfolio. Reason 11: How much does time cost? Vast question. How about owning a strategy that allows you to sell time. Your mission if you accept it and ……………… to wait and no matter what the action will do during this time. There is more tiring to earn money, right? Of course easy money does not exist, you just have to master a few parameters and you are a time seller. Reason 12: Besides paying dividends, what means do you have to increase the return on your portfolio shares? No ? With the options, I can rent my shares and take in an additional income with a risk equal to 0. I mean 0. I thus increase the return on my long position. I can rent my shares every month like for an apartment. Icing on the cake, if the company distributes dividends, I combine both. Reason 13: You want to buy stocks. First solution, you must buy them at the market price. How about having a strategy that allows you to buy at YOUR price and also get paid for it. This is one of the techniques Warren Buffet uses with options. He has been doing this very well and for a long time. How do you think the Oracle of Omaha made a fortune? By buying at the market price? Reason # 14: You want to buy stocks but at your price. Second solution you place a limit purchase order at your price. If the action never goes down, your order will not be executed. You just waited for nothing. With a suitable option strategy, you would not have your shares but you would have received a premium no matter what. It’s the same principle as reason number 12. Reason 15: You have been watching an action for some time because you know something is going to happen. Apart from waiting for the action to go one way or another, you have no other solution. A particular option strategy allows you to take a stand and wait to know what the title will do. The title goes upwards you win, the title goes down… .. You win too. Reason # 16: It's February 5, 2018. The S&P (SPY tracker) has just lost more than $ 22 in a week! You are upset and panicked. Well no, you can on the contrary rejoice because this is the time to apply very profitable option strategies which consist in selling volatility when it is abnormally high. Reason 17: You think your favorite title will move when the results are announced. Apart from betting up or down, you do not know how to take advantage of this movement while limiting your risk. With the options, you can withdraw gains related to the uncertainty of the announcement of the results. In addition, your risk will be known in advance! After these 17 good reasons, I think you are not going to ask me why but how do we use options. And you ? Do you have any other arguments to give me about the usefulness and the merits of trading options?
Here is one more. Leverage. If your stock goes up 10%, a call option on that same stock could be worth 80-100% or even more. One thing to remember with options, you have to have the direction or trend right and two, the stock has to move a great deal to be profitable by a huge amount. Your win rate trading options will be lower. My personal experience, the win rate is 40% for my trading. That is good enough to make monies on.
I have to hear from option experts here. I read that option trading is very complex and involve high knowledge and risky.
No no....options are easy. He gave you 17 reasons why. With stocks you lose 66% of the time but with options: - stock goes up you win - stock goes down you win - stock doesn't move you win - stock moves fast you win - stock moves slow you win Plus you get free leverage and free dividends!! This is gonna be my favorite thread of the weekend.
I'll take a couple hundred thousand of those shares of MSFT at your price($95), as per post #1. Reason #7.
Only 1 reason amateur retails should not trade options: It is like going to a gun fight, your counter party (a professional) carries a machine gun and you carry a pocket knife. Imagine trading against @destriero, @taowave, @Kevin Schmit.