Is Options Trading Investing?

I

ironchef

Every time I told my family and friends that I was an options trader, invariably the comments were: You are nuts, it is too risky; don't speculate; don't gamble with your money..... So, to the general public, trading options is risky business, like gambling. Even on this site, numerous folks differentiated trading from investing and I read posts here that told us not to gamble away our money by trading options.

I used to think trading was different from investing. About a decade ago I started trading equities (day trade, swing trade...). The results were nothing to brag about and led to my opinion.

However, my opinion is shifting. For the past 3 1/2 years I switched to trading options. It became my sole daily work and the principles behind my options trading were very similar to my investing. So, I am now including options trading as part of my overall investing strategy. ET helped crystallized and focused my thoughts and explained some of the subtle aspects of options trades and I am grateful for that.:thumbsup:

To you, is options trading investing, speculating, work or a business? It would be interesting to hear your thoughts.
 
Why does the label matter? Call it cock fighting. Anyone telling you to not gamble your money away trading options either lost money in options because they knew ZERO or are not able to learn or think their way is the only way. Useless input then.
 
optioncoach said:
Why does the label matter? Call it cock fighting. Anyone telling you to not gamble your money away trading options either lost money in options because they knew ZERO or are not able to learn or think their way is the only way. Useless input then.
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Coach,
You are saying trading is not gambling but is it investing?
OptionGuru said:
  • Option trading is not investing.
  • Option trading is Speculative.
:)
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Guru,
It is speculative meaning the odds of making a profit are low and very few people made money trading options?

Why is it not investing? If you buy CBOE's BXM, BXY or PUT (or trade like those indices) long term, what is the difference between that and buying SPY long term?

I appreciate both your responses.
 
If you buy an ETF that reinvests or pays out dividends you are investing. If you buy a wasting asset on an ETF you are speculating. Turn it around and sell options then you are in the insurance business.
 
ironchef said:
Guru,
It is speculative meaning the odds of making a profit are low and very few people made money trading options?
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Speculative is defined as "involving a high risk of loss". Option trading involves a high risk of loss due to its leverage - hence brokers disclaimers warning all potential clients about the risks with options.



:)
 
What is the underlying value of an option and who guarantees such?
You might get similar or even better results using options, but it's not the same asset as the underlying.
Interesting things can happen to people's accounts when things get hairy.
 
just21 said:
If you buy an ETF that reinvests or pays out dividends you are investing. If you buy a wasting asset on an ETF you are speculating. Turn it around and sell options then you are in the insurance business.
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Selling options is just as risky as buying options.




:)
 
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