The Real Secret Of Options Trading
By Jason Ng
Options trading is the trading of stock options and index options instead of the underlying stock or index itself. It has been popularized as a sure win solution to getting rich with very little money no matter the market condition. Indeed, it is the only way of making money in the stock market in any market conditions; Up, Down or Sideways. In fact, its power has been so mystified and glorified that many has come to believe that options trading contains some magical secret to never losing money in the stock market. But, is options trading really invincible? What is its real secret?
As Jack Black said in the movie "Kung Fu Panda", the real secret is that there is no secret!
Options trading is neither magical nor is a sure win trading method!
Yes, there are options trading strategies that allows you to profit under any market conditions but what good is executing a bullish options strategy if the market eventually goes down? What good is executing a bearish options strategy if the market eventually goes up? What good is executing a neutral strategy when the market breaks out suddenly?
That's right! Even though options trading allows you to profit from any market condition and even in multiple market conditions, the requirement for making money is still making the right call and having the right outlook. You only make money from a bullish options strategy if the stock or index goes up and you only make money from a neutral options strategy when the stock or index remains within a tight trading range. Furthermore, you could lose all the money you put into buying the options when your outlook is wrong!
The only way to making money in option trading is exactly the same as in stock trading. You need to pick the right stock and have the right outlook. The only difference is that you can have a lot more possible outlooks than if you just buy or short stocks. However, no matter how many outlooks are possible the only way to making money in options trading is having the right outlook. So, the next time anyone tries to make options trading sound like a magical sure win trading instrument, remember, nothing works if you cannot choose the right stocks to trade on in the first place.
Jason Ng is the Founder and Chief Option Strategist of Masters 'O' Equity Asset Management - MastersoEquity.com - and author of OptionTradingPedia.com. He is a fund manager specialising in options trading and his revolutionary Star Trading System has helped thousands.
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