INVESTING MONEY
Why You Should Learn Trading Options
Hello and welcome to a new Smart People Financepost.
As usual, let me remind you that this is the website where you can learn how smart people invest their money and grow their assets or get an income from them.
The strategies you are going to learn here, are not a get-rich-quick scheme but they will let you grow slowly and steadily.
You won’t listen to useless things that just fill the mouth but, every time I will go straight to the point and I’ll share with you only what worth focusing on to create your Wealth day by day.
Trading Financial Markets
TRADING FINANCIAL MARKETS IS THE BEST WAY TO CREATE WEALTH
You probably already know stocks and currencies but you might have not ever heard of options.
But actually, options are one of the most flexible and profitable assets that allow you to grow your wealth quite rapidly. So, in this post, I am going to show you why you should learn trading options and why you should start doing it from now.
Why You Should Trade Options
The options world is huge!
We have call options, put options, we can buy or sell them, we can create lots of combination with different options and, as a result, I can’t go too much into details in just one post so, please, take the general concept for the moment and I promise, in the upcoming videos I will teach you everything you need to know more about them.
Instead, if you are ready to start trading options with the best strategies available,check out my courses.
Let’s start.
POINT NUMBER 1
Using options you don’t need to be directional
What I mean with this is that usually when you trade stocks or futures or even currencies, you first analyze the asset, and then you decide either to buy (as for the majority of people) or sell the asset, as fewer people do. From that moment on you are subject to the ups and downs of the market.
If you are long, you only make a profit if the stock goes up and vice versa if you are short.
So, you only have one out of three chances to be right and make money because actually, stocks can go up, down, or moving sideways.
So your odds are very, very low.
What happens if you trade options instead?
In this case, things are different.
Now you can create strategies that help you earn money in all three different cases. If the stock goes up if it moves sideways or goes down.
As I told you before, I need to generalize here because options are so flexible and we have so many opportunities using them that it would take hours to show you everything but I promise, in my future posts I will go deeper into them.
Check out also my YouTube Channel where I am going to post some interesting videos about options, investments, and personal finance in general. Subscribe and don’t lose any updates.
POINT NUMBER 2
Options are capital-efficient
TRADING OPTIONS IS MORE CAPITAL EFFICIENT THAN TRADING STOCKS
OR OTHER FINANCIAL INSTRUMENTS
Here is a great point.
When you buy a stock, you simply multiply the stock price by the number of shares that you want to buy. But you usually need a large number of shares to be efficient because you need to cover trading costs, like fees and commissions.
For example, let’s say you buy 1 share for 74$ and you pay 4$ in commissions, now to be at break-even, the stock needs to increase to 78$, and to be in profit the stock must move even forward.
As you can see from 74 to 78$ it is already a 5% increment and you are only at break even.
So, if you want to be more efficient, you need to buy something like 100 shares.
Now, as for the previous example, to buy 100 shares you must pay 7,400$. Let’s say now the stock goes up to 78$, now your value is 7,800$ but this time you have paid only 4$ in commissions. Now your net profit is 396$.
The point is, to cover your trading costs you need a large capital to start with but not everybody might have or just want to invest that sum of money and here options can help because a single contract controls 100 shares, so in the same example, instead of paying 7,400$ to buy 100 shares, you can buy the option and pay much less, something like 500$ or 1000$.
This is a big difference. So, with options, you can control the same amount of money but pay much, much less for it.
POINT 3
Options have leverage
This point is strictly connected to the previous one.
As for the example before, if you pay 500$ to control 100 shares and the stock price moves from 74$ to 78$ (which is a 5% increment on the stock) you can see your option value increases by 35% or even more (again, it depends on many factors that I will explain in future posts).
Of course, leverage works also on the opposite side and if the stock loses 5% your option value might decrease by 35% and even more.
This is a very important point and I teach you how to use leverage correctly and not lose money in my “Selling Options Course”.
One more thing before moving to the next point.
The option leverage is an implicit one that means you cannot lose more than the money you invested into them. Very important.
POINT 4
Options have leverage
I have already talked about the fact that you can make a profit with options in all three stock price scenarios.
You can earn money if the stock goes up, down, or doesn’t move at all.
But options can make much more.
You can earn money using time decay selling options (actually, this is my favorite strategy) or you can choose to be more directional and still collect money in advance.
Or you can use them combined with shares to create a supplementary profit on the shares you already own or, you can even earn money while waiting to buy a share at a better price you like.
Options are amazing and I will show some of these strategies in the upcoming videos on my YouTube Channel, so don’t forget to subscribe. We will learn the pros and cons of each.
POINT NUMBER 5
Options help you with probabilities:
TRADING OPTIONS IS A MATHEMATICAL GAME
This is another great point I love.
When you buy a stock, you generally have a 50% probability to make money, I mean, they can only go up or down. With options, we have statistical probabilities shown in the platform that can help you decide what kind of risk and profit you like to take.
You can choose a strategy with more than a 90% of chance to be profitable (and earn less money) or, you can be more aggressive and chose a less probability trade but earn potentially a higher amount of money. And yet, this is priceless and a big plus of options.
I’d say that it’s a more mathematical game compared to stocks. You have many statistic numbers that can help you build your strategy knowing in advance your risk profile.
POINT NUMBER 6
Options can help you protect your stocks:
Yes, if you still prefer to trade stocks, you must know that options can help you protect your long positions against a sudden fall.
They are so powerful that you can achieve this target in different ways. You can simply create s sort of insurance on your long stock position or create a strategy that still provides you with downside protectionwhile earning a monthly income! Isn’t it great? I think so.
POINT NUMBER 7
Options are manageable
This is my favorite one.
With options, you have different ways to manage a position that is a loss and make it being profitable! It takes time to learn how to do it but it worths learning this skill.
POINT NUMBER 8
Options can be more relaxing
It depends on which strategy you chose to follow and especially how much aggressive you want to be but, if you learn the way I trade, you.
You can just check your position twice a day and still be profitable 95% of the time earning from 30 to 40% per year. Does it sound good to you? Keep follow me and stick around! I will show you how to do that.
CONCLUSION
To sum up, we have seen the 8 points that make trading options a good idea to implement to grow your capital.
I know these have been general concepts but again, I am going to share with you all you need to know to learn trading options safely and profitably.
In the upcoming posts, we will go deep into all the points we discussed today and we will see even more interesting concepts you must know to build your wealth!
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Have a good day, talk to you soon.
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