Got a very interesting call , wherein the caller asked us , ” What do you mean by strategy ?”
“Strategy means we will be creating a combination of positions which should give us profit as the things move in the series” was the reply.
” I am trading in options since so many years, I have not used any such thing. Do you think it is required by me? ” he asked.
We really got surprised by such questions about options trading or option trading strategies. Although people are trading ( or may be just gambling) in options since last so many years, the awareness level about various strategic alternatives available is very very low. Most of us only know that, if we think that particular stock will go up , we should buy call and if we think it will go down , we should buy put.
Beyond this , what will happen if the stock doesn’t move or move very little – no answer. Or if our direction is wrong , again – no answer or sometimes we get Stop loss as an answer. And let us be frank, Stop loss is also a loss.
Option trading can be a great business if we just focus on getting the basics correct and spend some time and effort in learning various strategies available. It not only can work as an insurance to my portfolio , but it can also generate very good returns on consistent basis. Only thing is we need to apply ourselves a bit. And how good are returns ? I will say, much better than what you can expect from any other business. Yes, much better than any other business.
Then why people are loosing money in trading specially options trading. Mainly because, when we do any other business, we invest time, we invest effort, we invest money and we invest our patience. But when it comes to stock markets, we do not want to put any effort, we do not have sufficient time , no patience but we have great expectations. I should get 100% or 1000% returns.
How can this happen ? Without input, we want extraordinary output and hence the failures.
Is there a solution? Yes , there is. As a first step, we must invest some time in understanding the trade. Option trading is more of mathematical process rather than prediction of markets. We need to understand the process and its application. That can be done through one’s own experience or you can always take services of experienced traders. In our website www.theoptionschool.in , we give schedule of workshops we conduct for helping you to understand the initial nuts and bolts of options trading. You may enroll there or you may use any other good quality service to understand the basics. The point is ,” before jumping into the pool, better learn swimming.”