Is Option Trading Easy?

Posted on Friday, November 1, 2019 at 1:36 PM

Let’s answer that question right now before we go any further…no! It takes a lot of work and patience to be a profitable option trader. Getting started by putting some cash into a trading account is easy. But that is where the easy part ends. Not only do you have to learn about calls and puts and the different strategies, you also need to know the option greeks. Then comes management. Managing a trade and the psychological aspects of trading are, in my mind, the hardest part about trading.

As humans we are not particularly designed to be traders. The emotional aspect of trading is huge. Many traders and investors are not prepared for it, and most do not overcome it. I hired a trading psychologist myself, and it was the best money I ever spent. So aside from what options can give and not give you, one needs to ask oneself, can I handle trading? That being said, options can lower an investor’s or trader’s risk and produce profits and losses as well.

Options cannot perform miracles, and you definitely can lose money trading them. But options allow you to hedge, use leverage and generate income.

Hedge

Hedging essentially reduces risk. Options can protect individual trades or your whole portfolio if need be. To me, that is invaluable.

Leverage

Options also provide leverage. You can use less money to have more exposure to a stock’s piece movement, especially an expensive one such as Amazon Inc. (AMZN). This in turn gives you more flexibility.

Income

And lastly, options can generate income. Reducing risk is the most important attribute to options, but being able to increase your profits is not such a bad thing. The best part about options is that there is a strategy for whatever your outlook may be. With stocks, you simple can’t make money from a sideways position solely on the underlying.

Yes, trading is difficult and especially option trading because there are more moving parts with options than, say, buying and selling stock. But if you are disciplined, option trading opens so many potential profitable and protection scenarios that, in my opinion, are well worth it.

John Kmiecik
Senior Options Instructor
Market Taker Mentoring, Inc.

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