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Can you make a living trading options? In fact, has anyone ever made a living just trading options?
This is a question that a lot of beginners who has yet to start learning about options asked me. In fact, for some of them, it seems like being able to make a living out of solely trading options is the only motivation for them to learn it in the first place.
Well, having traded options for more than fifteen years, I regard myself a professional options trader and I would say the possibility...
•5 Reasons Why Options Trading Better Than Stock Trading
Options trading has been the centre of much debate of recent years. Is options trading dangerous? Can we go bankrupt on Options Trading? Indeed, options as a form of derivative instrument is far more complex than the stocks that they are written based on and, like a wild stallion, can hurt you if you do not understand how it works and how to use it properly.
This brings us to the topic of this article.
In this article, I shall present 5 reasons why options trading is actually better than...
•Problems With Swing Trading Using Options
Swing trading is one of the most common ways of trading in the stock market. Whether you know it or not, you probably have been swing trading all these while. Swing trading is buying now and then selling a few days or weeks later when prices are higher, or lower (in the case of a short). Such a price increase or decrease is known as a “Price Swing”, hence the term “Swing Trading”.
Most beginners to options trading take up options as a form of leverage for their swing trading. They want to buy...
•Can You Lose All Your Money in Options Trading?
One of the greatest and most talked about risk in options trading is the fact that you could lose all your money in options trading very quickly. Well, many people lose all their money in stock trading too, so what makes losing all your money in options trading such a big deal? The fact is, investors only lose all their money in stock trading when the stock they buy becomes bankrupt which has a very low possibility of occurrence whereas the possibility of losing all your money in options...
•How to Choose an Options Strategy?
Options trading is as simple as buying call options for rising stocks and put options for falling stocks.
However, once you go beyond the initial stage of call and put buying, the whole universe of thousands of options strategies open up before you. For the first time you see almost endless possibilities of making money through options strategies and you might wonder which options strategy is the best and which options strategy to use for each situation?
This article will attempt to provide...
•Similarities Between Options and Futures Trading
After spending much time explaining the differences between options trading and futures trading to beginners to derivatives trading, I think its time to touch on the similarities between options trading and futures trading. Is options trading and futures trading really that different? What are some of the similarities? Well, there are actually four main areas in which options and futures are similar.
First of all, options and futures are both derivative instruments. This means that they are...
•Why Options Are Better Than Futures For Hedging
Futures trading can be used for two main purposes; Speculation and Hedging. While most retail futures traders get involved in futures trading for the purpose of leveraged speculation, it cannot be forgotten that the true purpose of futures contracts is for the purpose of hedging.
Hedging using futures is technique most professional money managers use for decades. However, there is one main problem with hedging using futures and that is the fact that the settlement price of futures contracts...
•The I-Ching of Options Trading
If you are reading this article, chances are that you might have come across or have some kind of knowledge in the term “i-Ching”. You must be wondering, how in the world is a five thousand years old classic related to modern options trading? Well, the truth is, everything about options trading, from basic strategies to advanced strategies to unheard of strategies have been explained and defined in the i-Ching!
I have been reading a lot of philosophical books lately, perhaps due to the fact...
•Pros and Cons of Futures Trading For Stock Speculation
Futures contracts were originally designed as hedging tools or “insurances” for the trading of commodities like wheat. As the production of wheat takes a long time and prices may change for the better or worse during that year those wheat takes to grow to maturity, the buyer of the wheat can go into an agreement with the farmer to buy their wheat upon harvest at a price agreed upon right now. Such an agreement made sure that the buyer will always be able to buy those wheat exactly at the price...
•Key to Options Trading Success
Lately, I have been asked about what I think is the single key that determines if you would make it as a rich man in options trading.
This is an extremely interesting question as I am not someone inclined to believe that any single reason constitutes to the success in anything at all. However, that got me thinking hard and reflecting on my own success in options trading. Then I decided to frame the question a little bit more academically. All things equal, what is the single key to options...
•1 Biggest Options Trading Mistake Ever
Recently, I have been answering options trading questions posted by options trading beginners at my website and it amazes me to find that MANY of these questions surround a single theme. Some of these questions are like:
“I just bought a call option, how do I take profit?”
“I bought a put option at XXX strike price, so what does it mean for me to hold this put option?”
“I think I made some money on my call options but how is profits calculated in options trading?”
Options trading beginners...
•Play Bookmaker Writing Put Options
If you have ever placed any bets, you would know that the person who wins most of the time is the bookmaker. Do you know that you too can be a “bookmaker” in the options market by writing put options? Not only can you play “bookmaker” by writing put options, you are actually also playing “insurer” where you get paid a premium for doing so no matter how things work out! Let me show you how!
If you have ever traded options, you would have bought call options if you think a stock is going up and...
•Put Options For Down Markets
The worst recession and stock market crisis of recent history hit the world late in 2007, taking the Dow Jones Industrial Index down from a high of 14000 points in October 2007 to about 6400 points in March 2009. Yes, more than 55% of stock market value evaporated over a period of slightly more than a year. Funds closed down and traders when bankrupt. This is the hardest market crisis in recent history and will certainly go down history as one of the most important.
How did your trading...
•Options Trading and Technical Analysis
Recently, almost no options trading seminar is without some mention or introduction to technical analysis. In fact, almost all of the options trading blogs out there in the internet use technical analysis as their main basis of decision making. Why is that so? Why is options trading so closely related to technical analysis now?
In order to understand the important relationship between technical analysis and options trading, we need to first understand what technical analysis does in the first...
•Why Most People Fail at Options Trading
Have you or your friends ever attended an options seminar, learned how “simple” it is to make a high income from options trading but yet when you did it for real, you failed to make any money consistently?
Indeed, from my observation in this industry over the past decade, I have noticed that the chances of success for beginner options traders are extremely slim. In options trading, as in everything else in life, only a very small percentage of people make money consistently from options...
•Options Trading and Risk
Is options trading risky? This is one of the most popular questions that options trading beginners ask. In fact, my clients ask me this same question all the time. I would then ask them “What do you mean by risky?”. The usual answer would be “Can I lose a lot of money in options trading?”.
At least this brings us somewhere. Asking if options trading is risky without a clear idea what risk is in the first place gets nobody anywhere.
Risk is defined in many different ways to different people...
•Options Extrinsic Value as a Stock Indicator
I bought DNDN shares last month at about $4.00 and less than a month later, I sold it for $21. Yes, that’s 425% profit in less than a month. Was that pure luck? How often has that happened to you? What if I told you that luck has nothing to do with this and that I bought DNDN shares knowing that it will break out strongly very soon?
Yes, I did know for a high level of probability that DNDN was going to stage a big rally soon and I didn’t even look at their news or their earnings nor financial...
•One Simple Tip to Improve Your Options Trading
Options trading is risky. This is what you hear about all the time. However, above all, Options Trading is STRESSFUL! Yes, most beginners lose money in options trading not because they cannot choose the correct stocks (most professionals cannot consistently get the correct stocks too!) but because they cannot handle the stress that comes with options trading and then crack and make all the wrong moves.
Are you one of them?
Have you ever bought a bunch of call options for a few stocks and then...
•Why Trading Stock Options is Better in a Recession
The 2008 recession and stock market crash is the worst financial and economic crisis since the great depression. By Feb 2009, the Dow has dropped almost 50%, erasing all its gains since 1998. In terms of absolute points, the Dow has dropped over 7000 points, which is more than the entire Dow index before 1998. Without doubt, this stock market crash has rendered many traders and investors helpless in search for profit.
Even though profiting during such market condition is a really tough thing...
•Balance of Risk and Reward in Options Trading
You don’t need to be a trader or an investor to know that the higher the risk, the greater the reward. This concept is true in all aspects of life and business. The more risk you are willing to undertake in life, the more life returns to you. Indeed, risk and reward are directly proportional and often in trading and investment, the more risk your account is exposed to, the greater the return on investment when things work out as planned.
Knowing that risk and reward are proportional makes...
•Delta Neutral Trading For Volatile Markets
The market crash of 2008 introduced levels of volatility that has not been seen for decades. Stocks and options traders alike suffered from a ton of bull and bear traps set on its long way down. Matters got worse when the market lapse into an extended neutral trend since October 2008, making it impossible to profit from directional trades using stocks or options.
Under such market condition, with volatility combined with uncertainty of direction, is there any way to make money at all?...
•2008 Market Crash Recap
2008 is over at last. It has been an extremely turbulent year and everyone's swept under its currents such that it was hard to see what actually happened, so, here's a recap of what happened in the stock market in 2008.
Summing up, the Dow lost a total of 4488 points this year, down 33.84%. The Nasdaq composite lost a total of 1075 points, down 40.54%. The S&P500 lost a total of 565 points, down 38.49%. The more volatile Nasdaq Composite became the loss leader this year just as it is expected...
•Rich Options Trading, Poor Options Trading
After reading the book “Rich Dad Poor Dad” by Robert Kiyosaki, I came to realize that not only is there a rich and poor path in life but also a rich and poor path in options trading as well. Many options traders experience defeat in their options trading career, especially during the first few months, because they are unknowingly walking down the poor path in options trading. There are many differences in the approach winners take in options trading versus the losers and we shall outline and...
•How Might the 2008 Market Crash End?
The stock market crash of 2008 is the worst that the world has ever seen in terms of the number of points erased from the major indices. At its lowest point to date, the Dow Jones Industrial Average has lost a historical 6749 points! To put this into perspective, the 2001 to 2003 bear market merely erased 4153 points off the Dow. In fact, many veteran economists and investors swear that this is the worst economic and stock market crisis since the Great Depression with unemployment rate already...
•Options Trading in Extremely Volatile Markets
The recent stock market crisis (2008) not only rocked the financial system and the world economy but also the pockets of countless options traders all over the world. Options traders who used to profit in the years prior to this market crisis broke their bank as none of their options strategies seem to work in this market anymore. So what is it about extremely volatile markets and how should one profit through options trading under such conditions?
Extremely volatile market conditions not only...
•Why Simple Put Options Buying Fail in Volatile Markets
The recent stock market crisis (2008) took the stock market down by more than 30% in less than a year. This has a lot of traders thinking that big money can be made simply by buying put options on stocks that will move down with the market, especially high beta ones. Nothing can be further from the truth. Most amateur options traders who did that either failed to make any money, make very little money or outright lose money even though the stock moved down a lot as predicted. Why is that...
•Are Futures Riskier Than Options
Let’s face it, derivative trading is risky. Period.
Derivatives such as futures and options are leverage instruments and by virtue of being leverage instruments, derivatives inherently carry more risk and exposure than pure and simple stock trading. Leverage instruments are risky because leverage allows you to do more with the same amount of money than you would normally be able to. Yes, leverage instruments such as futures and options have the potential to generate over 10 times more profit...
•Spotting Tops & Bottoms Before it Happens
Spotting tops and bottoms before it happens is definitely the Holy Grail to making a fortune in the capital market. Traders have been trying for ages to devise such a trading method. It doesn’t matter which market you are trading; Forex, Options, Futures or Commodities, you can make a fortune as long as you are able to sell before prices start dropping and to buy just before prices start rising.
The problem is, is it even possible?
Is it possible to tell when a car is going to stop when the...
•Trading Psychology to Make Millions
Trading Psychology – Introduction
What makes an F1 racing champion? Is it the car? Is it the technology that went into building the engines? No, it is the driver. The driver’s confidence around corners and patience in the face of daunting challenge by other drivers makes a champion. Similarly, it is the trader that makes the difference in stock and option trading. It is the stock or options traders’ confidence in their chosen methodology and their patience in the face of daunting price changes...
•Fundamentals Of Technical Analysis
Technical analysis was truly an arcane art before the internet boom. Chartists perform technical analysis in their secret rooms with data that was carefully collected from professional sources. Those were the times when stock prices and data did not have a medium through which to be readily available to the public and be ran through publicly available software to produce the charts that are available today.
Today, with internet in almost every household, technical analysis became an art anyone...
•3 Reasons Why Stocks Move
For years, I have been asked this same question over and over again, "Why does stocks move?".
For most people, the reason why stocks move has been a mystery. In fact, there are people who believed that someone is controlling these movements behind the scene playing against them! There are even people who believe that stocks move mainly due to good fundamentals. Well, look at it this way, if there is this big institution playing against you and taking all your money away from you, why aren't...
•Is Option Trading Gambling?
We have seen it way too often, haven't we?
Advertisements that tout making thousands of percents in profits within days and millionaires made within weeks, all by option trading! Such advertisements usually draw hordes of hungry, indebted gamblers who need that "one big win" to recover their debts or losses elsewhere to their unusually expensive seminars.
95% of those who walked into such seminars, paid for it and actually traded options, lost all their money. 3% will make some money within...
•Finance Series : Exploring Investor Rationality
The Efficient Market Hypothesis has been under fire since Eugene Fame of the University Of Chicago Graduate School Of Business first suggested it back in the early 1960s. The central idea behind the Efficient Market Hypothesis is the theory that investors are completely rational in interpreting and acting on market news and information (which, ostensibly, is fully revealed public knowledge).
It has since come to be known as the Theory of Rational Expectations. This rational investor behavior...
•Investment Series : Risk Free Investment Methodology
For a millennium, mankind attempted to define and measure risk.
From the early days of Pascal and Golton to the modern forerunners in academia, defining and measuring risk has been a relentless pursue. Until we properly define and measure risk, there seems no way to mathematically defeat risk, creating risk free financial markets and economies.
Mathematics opened up a new door for mankind with the invention of probability study. Mankind started using probability studies in real life...
•Investment Series: Why Rising Stocks Always Pullback?
We've all been frustrated in the stock market before, haven't we?
Did you remember the time when you identified a really good stock with really good news on its heels and rallying strong? However, just a couple of days after you buy shares of that company, it pulls back and you incurred a loss? Even worse when you used futures on that stock instead?
Didn't it make you wonder why such strong stocks pull back so strongly? In fact, why does stock markets even pullback as a whole?
There is an...
•Option Trading : Why You Should Never Compound Profits
Perhaps the most direct way of investing long term in stock options is through buying LEAPs call options. LEAPs call options are stock options that expires 6 months to a year in the future. This kind of long expiration stock options allows anyone to benefit from the same move in the underlying stock in a leveraged manner, using lesser money than stock traders do.
However, the one mistake that most option traders make when investing long term in call stock options is that one magic word that...
•Stock And Option Millionaire Psyche
If you are like most of us, we have all lost our fair share of money in the stock markets using strategies written by so-called gurus and experts costing thousands of dollars.
Have you ever wondered, how does these stock and options trading experts develop these strategies, prove its worthiness all over the internet and in books, made money with them, but when you use these stock or option trading strategies, its magic fades away and you started losing money…
Going deep into the core of the...
•Portfolio Management Art Of War
It’s been a long and hard decade…
Having been managing investment portfolios and accounts for the past decade both professionally and personally, me, like an army of other portfolio managers out there, are not only looking for the perfect trading system, but also the perfect way to manage an investment account.
Indeed, there are whole bombardments of theories of risk management and portfolio management out there that it is mind boggling. There are risk management concepts that attempt to...
•Why Most Stock Pick Service Fails
You know about the multitude of stock pick services out there that pick stocks for subscribers through newsletters and the internet, right? These stock pick services usually claim to be able to choose stocks that beat the market consistently. While some of these stock pick services truly produce consistent performance over the long term, many of these stock pick services usually fail the moment you sign up or after a short while.
Here, we will explore the reason why most stock pick services...
•Newton’s Laws Of Stock Market Trading
Read the oldest stock market wisdom from the world renowned physicist.
This revelation had me surprised too. I was idly flipping through my old physics textbooks yesterday when it suddenly struck me. I was amazed to realize that Sir Issac Newton’s laws of physics points to so many profound and important rules in the stock markets today.
So, here we are… the physics of the stock markets.
Newton's First Law of Trading
“A Stock at rest tends to stay at rest and a Trending Stock tends to stay...
•Option Trading – Developing An Option Trading System
There are 2 kinds of option trading systems in general; Discretionary and Mechanical. A discretionary option trader follows no specific rules but chooses, enters and exits an option trade using all of his knowledge or gut feeling. A mechanical option trader is one who translates his knowledge of choosing stocks, entry and exit into objective rules. Such a system is commonly translated into a computer program in order to completely automate the option trading system. The advantage of mechanical...
•Stock Market Trading Styles Defined
Have you ever heard of the terms Scalping, Swing Trading, Trend Trading and Momentum Trading? Wonder if you are any of them? Wondering what suits you? Here’s a quick definition.
The different forms of trading are actually better differentiated by time frame more than the techniques that are involved. Because of the difference in time frame, different techniques must be used in order to reap profits from the capital markets.
>From the shortest holding period to the longest, we have...
•Investment Series – Investor Versus Trader
Many people have mixed up the terms “ Investor ” and “ Trader ” to mean the same thing. They can’t be more wrong. It is exactly the mixing up of these 2 very important terms that led to many people starting on the wrong foot in the capital markets.
An Investor is a person who puts his money where it can potentially generate a return. He does not usually get involved in the money making process. Investors include buyers of investment real estate and buyers of funds.
A Trader is a person who...
•Online Trading And System Trading
Indeed, online trading has revolutionalised the way common folks like you and me trade in the capital markets.
Online trading has its pros and cons. Online trading’s main pro is convenience and speed, giving a trader maximum control of all aspects of trading. Conversely, online trading’s main killer con is in the tons of human error that can happen due to a lack of guidance.
Due to a lack of guidance, most online traders find themselves extremely prone to their emotions when trading...
•Option Trading Explained – In Layman Terms
Robert Kiyosaki says that Option Trading is the investment of the rich.
Indeed, option trading is the most versatile form of investment in the world today. Its versatility has been the topic of many speakers all over the world. Terms such as “Covered Calls” and “Credit Spreads” have become well known amongst traders new and veteran alike.
Option Trading Explained - Simply put, it is the trading of option contracts on a particular stock. Options Explained – A contract that allows you...
•Holy Grail Of The Capital Markets
Introduction
Ever since I retired at the age of 28. I have been doing a lot of thinking into these “Tough Cases” of the investment world. What I present today hopes to unveil the most mysterious of them all, the Holy Grail of The Capital Markets and I will be giving you my argument as to why it truly exists and to help you find your personal Holy Grail of Trading and Investments by the time you finish reading this report.
So let’s go treasure hunting…
The Fabled HOLY GRAIL…
We have heard...
•Stock Option Trading Millionaire Principles
INTRODUCTION
Having been trading stocks and options in the capital markets professionally over the years, I have seen many ups and downs.
I have seen paupers become millionaires overnight…
And
I have seen millionaires become paupers overnight…
One story told to me by my mentor is still etched in my mind:
“Once, there were two Wall Street stock market multi-millionaires. Both were extremely successful and decided to share their insights with others by selling their stock market forecasts...
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