Sabtu, 12 Januari 2013

The Amazing Worlds of Options !

Have you ever heard of options trading? Most people who have heard about options, would have been told that it is an extremely risky financial instrument. 

I have covered some of the most powerful strategies used by professional stock investors. Value stocks return an average of 15-25% annually as well as momentum stocks that give huge returns over a much shorter period of time. 

Is it possible to achieve even higher rates of return and at the same time lower our risk even further? 

The answer is YES, and it can be achieved by using the power of Stock Options (which we will just refer to as 'Options'). 

Indeed, when I first heard about people trading options a couple of years ago, I immediately had a negative perception that it was a highly risky and speculative tool that was to be avoided by any serious investor. 

However, when I started to notice first hand how some of my friends were making huge monthly returns on their money with Options, I got really curious and decided to learn everything I could about this tool and make my own judgments!

Options Can Be Highly Risky... Yet Highly Safe
So what did I discover? 

Are options really that much riskier than trading in stocks? Well, yes and no. The truth is that for most people who are not trained properly in how to trade options, it can be EXTREMELY RISKY. 

This is because when used inappropriately, you can lose 100% of your investment or a whole lot more within a short period of time. In fact, options can expose you to unlimited risk when traded in the wrong way. 

This means that you could lose a lot more than your starting investment as compared to stocks where you can only lose whatever you have invested.

Investing in Options requires a lot more knowledge, skill and discipline as compared to investing in stocks alone. The reason why many people lose money in Options is because they lack the expertise in buying the right kind of stocks (i.e. value or momentum style) and are totally ignorant of the true value of the
stocks on which the options are written. 

This is the ultimate recipe for disaster. That is why any investor has to  ensure that he/she has a really strong grounding in stocks, before being introduced  to the amazing world of Options. 

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