Few thoughts on options trading through Q&A Part #2

The conversation between my friend and I, Part 2! 

Q: Trading Options is extremely risky. I afraid to loss all my money in trading options. 

Lifestyle Options Trader (LOTr): There is risk in everything that we are doing. If you drive a car on the road, there is a risk of car accident but it does not refrain you from driving. What is more important is that you need to drive carefully. The same analogy for trading options. As long as you trade carefully and manage the risk well, you are safe! People can lose all their money in trading any financial instruments or doing any business. Hence, I strongly disagree that trading options is extremely risky as I hold the believe that trading options in fact is extremely safe if and only if you trade it correctly. To learn more, you can refer to my previous post such as portfolio management, common trading pitfalls, etc.

Q: Can I make a million in a year or two by starting up with USD3k as my capital in trading options? 

LOTr: OK, so now we are talking about getting rich quick :). Theoretically, this can happen as options can be used as an instrument to leverage, which mean if you buy stock to make 10% return, options can magnify it to 50-100% return. However, we also need to understand the concept of probability. While this can happen, it also means we need to trade against all odds by taking in extra risk to reap the exceptional return and hence the probability of success is low. My style of trading is to create a healthy cash flow and never over-leverage to avoid black swan event to hurt my portfolio. 

Q: Learning options trading seems to be complicated... 

LOTr: I recommend you to read my blog starting from the very first post. It should be able to give you a very good understanding of options as I tried to avoid using technical term in my first few posts. I am also in the midst of developing a website for options education purpose and I hope it will help you better. Of course I welcome all the feedback to improve my blog!  :)

Q: What is your plan in the near future? 

LOTr: As mentioned previously, I am currently developing a website for options eduction. I am also coaching a few friends who are keen in trading options. Apart from that, I am preparing options eduction material that include a lot infographic to ease the learning. I hope I can share this with wider audience in the near future. Last but not least, I will continue to blog :)