Are options a risky way to trade? Why or why not?

Question

References and personal experience welcome!

Answer 1

Options have additional risk to stock trading for instance, because not only do you have to be right in the direction you need the underlying on the option you bought to go, but you also have to have this happen before the option expires.

But at least when you buy options, you know what your risk is - that you can only lose the cost of the option. The BIG risk in options trading is that people hear that 80% of all options expire worthless so you should sell options and collect the premium instead of buying options and have to pay the premium. So they sell out of the money options for small amounts like .25-.50 AND then there is the time that something happens like the company gets bought out OR the company gets a fda approval - some 'big' even AND they lose way more money on this 1 trade then they made on all their other trades.

Here are a couple of links to good options education programs if you are interested:

http://www.thetradersresource.com/options-strategies.html
http://www.thetradersresource.com/investorflixpreview.html

I like options trading very much - if you do get into this something OR have others tell you how great it is to sell options - always keep in mind that the risk-reward from selling options is unlimited risk and limited reward.

Answer 2

Options are often thought of as being very risky. However, this is not always true. As part of a strategy, they can actually lessen risk. For example, writing call options is very risky. Writing covered call options is a very safe investment.

Answer 3

Options are very high risk, because you are betting on when and how much a stock may rise or fall. It is a complicated business and difficult to master.

Answer 4

Here are some good articles on options trading

http://www.themillionaireblog.com/options-calls-and-puts-2/

Answer 5

yep..buy bonds rather