How Do You Trade Options on Stock?
It is not uncommon for people to talk negatively about options. This is because so many option trading “newbies” get involved without the proper education and end up losing their shirt to the more seasoned options traders. This happens because 80% of all options expire worthless! Thus, when you are new to options and don’t understand the more advanced defined-risk spread strategies, it is not hard to lose money. The newbie option trader lacks a solid trading plan, money management system, and the understanding of how professional option traders make money consistently.
Uneducated options traders are at such a disadvantage that it is almost unfair. Consistently profitable and professional option traders, often times, net premium sellers using a sound trading system. You will understand how this works later on…
Some of the Key Differences Between Stock and Options are as Follows:
| OPTIONS | STOCKS |
|---|---|
| Decaying Assets | Do Not Decay |
| Multi Dimensional | One Dimensional |
| Less Capital Outlay | Higher Capital Outlay |
| More Volatile Swings | Less Volatile Swings |
| Can be Assigned Stock | You Are Assigned |
| Don’t Actually Own Anything | You Have Ownership |
| Much More Lucrative | Not Lucrative |
Once you understand options and all the many different strategies that come with them, things will start to make much more sense and trading options will become one of your primary vehicles for building wealth and producing income in the Stock Market!
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