Kerry W. Given, Ph.D., aka Dr. Duke, has over twenty years of experience investing in the stock market and over seven years experience trading equity and index options. He has taken many classes on investing and trading through the years and has discovered first hand how difficult it can be to separate the financial facts from the marketing hype, myths, and get rich quick schemes. He can be reached at: www.ParkwoodCapitalLLC.com
Selling education on options trading is a big business. We see infomercials on television and receive emails advertising free trading software and foolproof trading systems. Unfortunately, there are many “snake oil salesmen” operating in options education. They are busy selling the dream of instantaneous riches without effort – and their price tag isn’t cheap.
I recently came across the following statements on option education web sites or advertisements for those web sites:
Make all the money you ever dreamed of trading options!
Trade options like a pro tomorrow!
Want to make 627% trading options?
The first statement doesn’t even deserve comment. The second statement is extremely misleading. It is certainly true that ordinary people of average intelligence can learn how to trade options – but it won’t happen tomorrow! Learning the fundamentals of options terminology, how options trade, how they are priced, and then all of the different options trading strategies and their behavior in differing markets simply does not happen overnight. It requires time, effort, and practice. In my experience, a minimum of six months is required for the fundamental education, paper trading, and then some taste of success trading in small lots before scaling up in volume.
The advertising line, “Want to make 627% trading options?”, is preposterous, but apparently it sells and brings in people. Certainly, it is possible to make returns of several hundred percent trading options. But it is also true that you could easily lose 100% of your money very quickly if you did not know what you were doing. Options trading strategies with the potential of several hundred percent returns are inherently trades with low probabilities of success. So, yes, I would like to make 627% trading options, but the presumption in this advertisement is that you can do that on most, if not all, of your trades. That is simply not true.
If you are interested in learning to trade options, here is a checklist to ensure your success:
1. Find a reputable options education firm.
2. Continue your search if the options education firm hypes the potential returns or suggests this will be quick and easy.
3. Check references from former students.
4. Expect to spend at least three months learning the fundamentals and trading on paper.
5. Hire a trading coach who will be on call to help and answer questions as you begin to trade with real money (this will actually save you money).
6. Scale up slowly.
Learning to trade options and generate a steady income from the markets is indeed feasible. But it requires time, effort, practice, discipline, and coaching to be successful. Don’t be deceived by the hype.
- Related Videos
- Related Articles
- Ask / Related Q&A
- Bewildered by Options Trading? Don’t Worry, Help is on the Way!
- Option Trading - Developing An Option Trading System
- Rich Options Trading, Poor Options Trading
- Online Brokers for Options Trading
- Option Trading Tip - so Why Trade Options?
- Option Trading Explained - In Layman Terms
- Options Trading for Beginners: Making More of Your Money
- Three Winning Bear Market Option Trading Strategies Revealed
Money Saving Tips
By: Anthony Laborin | 09/11/2009There are a one to two tips everyone can utilize to save dollars. They get lost through the cracks and end up costing people a lot of dollars long term, but continue to be brushed off because they do not matter until the last second, and people see throwing down a few seconds or dollars now as a unneeded cost, when in reason it causes a lot of dollars added. These tips are numerous, but we will give you some of the most money-saving here.
Financial Mistakes People Make
By: Anthony Laborin | 09/11/2009There are a multitude of mistakes people do short term that will end up costing them in the future, but they brush them aside because they do not feel the consequences until way, way later in the future. This is the most applyable in the financial stage where people toss around and fritter away cash like it has no worth. The difficulty in many of these segments is you only get one shot at them. You can not learn from your mistakes because the problems will end up costing you in the years to come
Saving Cash
By: Anthony Laborin | 09/11/2009Saving cash is awesome. If you put individual things in process now, you will be financially secure far far in the future. If you hold off until the last second, you will at some point be very in debt when you get to your later years. It may seem exciting to spend now, but when you are monetarily strapped for 40 years because of your five year choices, you will see the gain of your choices.
Stock Market Predictions > Stock Market Forecast – Hot Stocks to Buy in 2010
By: greg dobson | 08/11/2009Best Stocks to Buy – How to Pick Stocks Now at MomentumStockPick.com
Lets Get Rich
By: Frank Belliveau | 08/11/2009How to get Rich Quick! How frequently do we get this message every day in our email or blasted to us over the airwaves? Too many to add and so much so we become numb to the message. Here is precisely how it is possible to get rich fast. Count your blessings. What? You don't have any blessings? Oops! Think again! Everybody can find some blessings if they but look in more detail. Love : The love of your kin and mates and your love of humanity. This feeling, that many call 'l...
Mistakes When Investing With A Commodity Trading Advisor
By: Andrew Abraham | 08/11/2009There are exist numerous mistakes when investing with a commodity trading advisor. After being on both sides of allocating to commodity trading advisors as well as being one myself it has become very clear to me some of the mistakes that investors make.
Municipal Bonds A Dangerous Investment For 2009
By: Andrew Abraham | 08/11/2009Many times just using logic an investor can steer away from problems. It seemed forever municipal bonds were considered one of the safest investments. One did not get rich by investing in municipal bonds however they were consistent and the default possibility was almost not a possibility.
What Is a Structured Settlement?
By: Ruzlan | 08/11/2009A structured settlement is a financial or insurance arrangement, including periodic payments, that a claimant accepts to resolve a personal injury tort claim or to compromise a statutory periodic payment obligation.
Beware the Hype in Options Trading
By: Kerry Given | 01/07/2009 | Wealth BuildingThe "get rich quick" sales pitch is common in many business areas. But it seems to be pervasive in the options trading education market.
There Is No Free Lunch
By: Kerry Given | 23/06/2009 | InvestingWe all have a tendency to believe that someone out there has the secret formula or inside track to making money in stocks and options trading, and if we could just find that secret, we would be making lots of money with minimal effort. Of course, that simply isn't true. There is no free lunch.
Vertical Spreads and Implied Volatility
By: Kerry Given | 08/06/2009 | Wealth BuildingThe credit spread and its corresponding debit spread at the same strike prices will always have virtually identical returns on investment (ROI). This paper addresses some of the myths surrounding the role of implied volatility in the vertical spread, both at initiation and over the course of the trade.
Facts and Fallacies About Risk/Reward Ratios
By: Kerry Given | 08/06/2009 | Wealth BuildingTrading strategies come in all sizes and shapes to suit anyone’s style and risk preferences. But the reality is that none of these strategies have an inherent advantage. Some trading education firms and authors of trading books will often claim that they have found the holy grail of trading and have the “best” trading strategy. Each trading strategy has its own set of advantages and disadvantages. One must learn to manage the trade in such a way as to develop a probabilistic edge.
Option Expiration and Exercise
By: Kerry Given | 08/06/2009 | Wealth BuildingBeginning options traders often make costly mistakes due to either a lack of knowledge or misinformation about the basic parameters of options and their exercise. Examples of common errors include being surprised that one is unable to close an index option position on the Friday before expiration, or being surprised by an unhedged option exercise during expiration. This paper covers some of the basic concepts surrounding option expiration and how options are exercised.
Why Losing Trades Are Good For You
By: Kerry Given | 07/06/2009 | Wealth BuildingThe reality of the trading business is that a large percentage of one’s trades will be losers. Every business has overhead expenses, or costs of simply opening the doors for business. Trading is no different and trading losses are a large part of those overhead expenses. Once one accepts that aspect of trading, it becomes much easier to close losing trades early with minimal emotional attachment.
Trade Options with a 90% Probability of Success
By: Kerry Given | 07/06/2009 | Wealth BuildingIt is common to see web site banners or other advertisements similar to the title of this article, touting the benefits of options trades with probabilities of success of 85-90%. But that can be very misleading.