It is exciting to hear that "90 percent of options expire worthless.
" It gives you the feeling of being an insider and the hope of finding a magic bullet with which to win the so-called trading game.
Only once you attempt it do the numbers not add up to the hype.
It is easy to be down on yourself and assume that somehow you are doing something wrong.
This is not the case; it is just the classic example of being overpromised and underdelivered on that promise.
There are some empowering realities in knowing the truth about options that will make your option sales easier.
First, the fact that the majority of options are not held until expiration releases you from holding on to the hope that the option that you sold, that is now losing you money, is worth holding on to until the absolute end.
This reinforces the concept of cutting your losses as quickly as possible.
Second, you can feel confident, as a seller, that if you make money on the contract you can sell it into the marketplace (offset) along with the majority of traders with little or no worry that you have somehow missed out on profits.
You are doing nothing different from what other option traders are doing.
Finally, you are releasing yourself from making a financial commitment that you cannot afford to make.
When you sell options, you are limiting your profit to the premiums that you collect and exposing yourself to unlimited risk.
If you believe that 90 percent of options expire worthless, it becomes easier to take risks and chances that you would otherwise avoid, because you believe the odds are in your favor.
How differently will a trader operate if he knows that when he sells an option he possibly has a 60 percent chance of the trade going in his direction, and only half of those will make it to expiration? One hopes he will operate with the caution and respect that selling options requires, and will sell options with his eyes wide open.
The following option selling techniques-selling straddles, strangles, and naked options-all have the opportunity to be profitable, in much the same way that purchasing options is successful.
Selling options requires the same vigilance and common sense as purchasing options if you hope to make your trading plan successful.
The ability to stick with your money management techniques and your trading goals will help you make sure that selling options is worthwhile.
" It gives you the feeling of being an insider and the hope of finding a magic bullet with which to win the so-called trading game.
Only once you attempt it do the numbers not add up to the hype.
It is easy to be down on yourself and assume that somehow you are doing something wrong.
This is not the case; it is just the classic example of being overpromised and underdelivered on that promise.
There are some empowering realities in knowing the truth about options that will make your option sales easier.
First, the fact that the majority of options are not held until expiration releases you from holding on to the hope that the option that you sold, that is now losing you money, is worth holding on to until the absolute end.
This reinforces the concept of cutting your losses as quickly as possible.
Second, you can feel confident, as a seller, that if you make money on the contract you can sell it into the marketplace (offset) along with the majority of traders with little or no worry that you have somehow missed out on profits.
You are doing nothing different from what other option traders are doing.
Finally, you are releasing yourself from making a financial commitment that you cannot afford to make.
When you sell options, you are limiting your profit to the premiums that you collect and exposing yourself to unlimited risk.
If you believe that 90 percent of options expire worthless, it becomes easier to take risks and chances that you would otherwise avoid, because you believe the odds are in your favor.
How differently will a trader operate if he knows that when he sells an option he possibly has a 60 percent chance of the trade going in his direction, and only half of those will make it to expiration? One hopes he will operate with the caution and respect that selling options requires, and will sell options with his eyes wide open.
The following option selling techniques-selling straddles, strangles, and naked options-all have the opportunity to be profitable, in much the same way that purchasing options is successful.
Selling options requires the same vigilance and common sense as purchasing options if you hope to make your trading plan successful.
The ability to stick with your money management techniques and your trading goals will help you make sure that selling options is worthwhile.