Why choose options trading
- Thread starter Jfranco_2003
- Start date
Agreed. But don’t you think profits are also higher here then? Though risk is high but if done careful enough with risk management, one can be good.
yes both returns and gains are much higher (from a % of invested capital stand point). but you have to be great at risk management (which im not) because major swings up and down happen faster with options...ive had several go from basically break even to worthless (90%+ loss) in a matter or hours. You also have to be good at entry points because you cant sit on it forever to come back in your favor...clocks tickin with options.
Im going to keep working on it, educating myself while making small options trades...but i can tell you if something doesnt click soon i have to walk away and go back to equities. I am not so much giving advice as i am not qualified to do so...just sharing a noobs perspective that is struggling to make the switch from underlying to options.
Good luck and I hope you can figure thing out as option trading is hard but fascinating.
Until you can figure out how they are priced and the idiosyncratic characteristics of what you are trading, it is hard to make money. The exchange traded option market is very efficient meaning there is no edge buying or selling in general.
Some of us got lucky riding this bull market. But it is not skill.
Someone here on ET (@drcha ) gave me this advice back in 2014 which completely changed my fortune, i am going to give you the same advice: If you are new to options, try trade longer expiration options, short duration (intra day or a few days) has too much noise and volatility, unless you are very experienced you will get burn.
Another comment: You mention risk management, since options are leverage instruments, never risk all of your tradable funds. I seldom commit more than 20% of trading capital to trading options. Also, options themselves are limited risk instruments (buy or write-covered, or spreads... unless you use margin or trade naked), selection is key, risk is already bounded.
Best wishes to you.
Yes you have to wait for clearing to go trough before you may make the next trade.
You can work around this by having multiple brokerage accounts and treat them as one virtual account. With four Cash or Reg-T accounts you can make 4x the allowed trades.
Exactly. That there, 100%.