cant wrap my head around options, page-11

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    aurox

    Nathanblack is supportive of options trading. I am a little more circumspect.

    The mind set for a options trader can be very different to a physical or futures trader, and not many make the transition successfully.

    It is important to remember that when you trade options, you are trading the speed at which the prices move as much as the direction.

    Options trading is more often about rising and falling volatility than rising and falling prices.

    You might correctly predict a price rise in a particular stock and buy calls, but if the price rise is slow up to expiry, the profit earned on the upward price movement may be less than the premium spent buying the option and you may well end up losing money even though you picked the direction correctly. In that case, the bear trade - selling calls - is profitable in a bull market, which is completely counter intuitive.

    If you want uncomplicated leverage I suggest that you borrow some money to trade, or trade futures. There is more risk, but you will be on more familiar ground in managing the risk.

    Good luck with whatever you decide to do.
 
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