Options trading myths
Options can be risky, even very risky, but they don't have to be. Today I'm starting a series of articles about options trading. I will show you how options can be less risky or more risky, depending on your risk options. I will show you that there is more than one way to make money with options. I will expose some of the myths and misconceptions about options trading. In a recent Seeking Alpha article, my fellow contributor Allan Harris wrote: Spreads, credit spreads, butterflies, reverse myths, writing calls, protective calls, writing puts, protective puts, bums, thumbs, thumbs up your All of these are designed to be risk averse, limit losses, limit gains, generate high win rates and tiny profits. Give me a break, that's not why I buy options. Let's pretend we are now before Apple's NASDAQ: Assuming you are right, what would be the best way to play it? Alexander Elder's excellent book " Come Into My Trading Room ". This is for limiting loss to a small fraction of accounts. On any one option trade the maximum gain is trading unlimited. Well, trading might be right, and it might work for some traders. But do you know in advance what will be your winning ratio? And if someone tells you myths he never had five straight losers, he is either not enough time in this business or not telling the truth. Yes, the maximum gain is theoretically unlimited. When I trade options, I treat trading like a business plan. Luck is not part of that plan. What if you were wrong? How much would that trade lose? In another words, we are back to the previous question: How often does it happen? Do you rely on luck to get those gains or do you have a plan? Myths while the stock was unchanged. GOOG trade and Baidu NASDAQ: Few small winners achieved with low risk might be better that one big winner achieved with higher risk. What really matters is the return on the overall account. If you learn to ask the right questions, you can avoid the options and properly evaluate an options strategy in context of the overall portfolio return. I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. Long Ideas Short Ideas Cramer's Picks IPOs Quick Picks Sectors Editor's Picks. Myths And Misconceptions Of Options Trading Feb. So let's begin our journey. Harris, I have a quiz for you. Buy the weekly calls. Harris continues his theory: Some questions to Mr. How much of your capital do you allocate for those positions? How much time do you give the trade to develop? The first two questions are directly related to position sizing. Investing IdeasTechnologyOptions. Want to share your opinion on this article? Disagree with this article? To report a factual error in this article, click here. Follow SteadyOptions and get email alerts.
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