If you are the type of investor that sees options trading as far too risky, then think again. This is a major piece of fake news that has circulated for decades. While it may have taken a while for options to really get rolling and be seen as a credible investment route, they stand as one of the more secure prospects in the world of trading. Here are the biggest myths about options that you should know about.
Anyone Can Dive In
This is categorically untrue and entirely made up. Options trading is not for the beginner investor in any capacity. In fact, if you rocked up to a broker with no prior knowledge or experience in trading, they would shut the door in your face. Options are complicated on the surface and exploring them is something that only someone with experience can really handle. Making money with options requires a ton of hard work and a complete commitment to the process. There are things to learn, things to do every day, and a lot of upkeep as well.
Nobody Has Ever Made Real Money
Once you have found your feet with options trading, you should be able to make decent money. Expert investors with their own following like jamescordier.com are a prime example of this. There are more than decent profits to be found if you know which strategies to pick and how to navigate the market.
There Is No Diversity in Options
Many people believe that options trading restricts investors to simply selling calls or buying puts. Well, this could not be farther from reality. The fact is, there are dozens upon dozens of viable and diverse strategies that all benefit a portfolio. Regardless of what your trader journey holds and where your goals lie, options have something that will work for you. In fact, they are one of the best ways to create diversity within your asset portfolio because they not only give you leveraging power, but they are also primarily used as a hedge tactic.
Too Many Options End Up Out of the Money
Out of the money is a term you will hear a lot if you invest in options. It means that a contract has expired at a loss, and the trade was a bad call. There is a common misconception that this fact can be assigned to the majority of options contracts, but again, this is misplaced. There is a wide range of options calls and puts that see attractive profit margins for individual investors.
Brokers Are Not Worth It
It is fairly impossible to trade options without a broker verifying your experience. So, for this reason alone, this myth can go straight into the bin. Options traders have to show beyond reasonable doubt that they are ready to dive into this world. This means you are only accepted onto the trading platforms if you can represent your financial situation, trading experience, and ability to navigate the risks.
Options Is for Short Term Investing
There are no rules at all to say you can only use options as short-term investment model. People may think that it has no sustainability over a longer period of time, but the fact is that options can be used for as long as you deem it a viable form of investment. Trading is never a fixed thing, and it is important to accept there must always be a level of flexibility that guides your movements. Without this, you will find it difficult to actually make realistic returns come true.
What Is the Truth?
The truth is that there are great benefits that come from trading options. Let’s explore these a bit more below so that you have not only the facts but more information as well.
Options give you leverage, and that is something you can store away for later. Leverage means that you have more power than you do with other assets like stocks because everything is up in the air and there are no obligations to speak of. You spend a minimal amount of capital when you actually invest in an options contract, and if you do it right with the correct information backing the trade then you can see major returns on this.
Becoming an Expert
It doesn’t take too much knowledge to open a trading account and begin investing in stocks and shares. Whereas, when you get to the point where you are confident and capable with options trading platforms, you are already halfway to becoming a true expert. This means the viability of your portfolio increases and you are also in a premium position when it comes to accessing the right kinds of strategies for your capital.
So, there are a whole load of myths that need cracking wide open when it comes to options contracts. It is important to move with the facts as opposed to living life fueled by misinformation, as you could be missing out on an amazing opportunity.