Many people intending to trade options or stock often start by looking for the best strategy that willassure them more income with minimal risks. If you look around, brokers are often on the lookout for naïve traders with promises of unlimited wealth with minimal effort. But does this ever happen? Is there a secret to trading options and stock profitably?
The truth is, successful trading requires knowledge, hard work, and discipline. These are the three key things that will see your success in the market whether you are a newbie or a pro. There is no quick or easy success in trading and particularly options trading. Moreover, the risks involved are many which you need to learn and understand.
The good news, however, is that amidst all the challenges, success in stock and options trading is achievable. It is not actuarial science, there is no secret, and most importantly there isn’t a ‘best ‘strategy.
The pricing of stock and index options is rooted in probability distributions. When you buy or sell an option, the price you pay or receive is derived from an estimate of the likelihood of that options’ worth at a point in the future. Although many people will give their opinion on the strategies they find working best for them, do not be lured as most of the time, these are just marketing hypes.
If you want to make money trading, then go for it. Although you will comeacross article flagging options trading as being a scam; the truth is, it isn’t. You can make orlose money with the trade, just like it is with many things in life, there is losing and winning.
All options strategies, over time and many trades, will lead to the same result: a return close to zero or perhaps even a little negative after commissions and slippage. But it is possible to shift the probabilities in your favor.
What is important in options trading is to identify options that work for the particular time. If you are lucky, you will make huge profits, but there are times where your luck may hit a snag, and you lose a few bucks. In fact, often traders believe that they have a found a strategy that is consistent enough. So they start trading the option thinking that they have found an incredibly high probability trading strategy. Then what happens, the market moves against them, and they realize that they have lost more money than they could imagine.
The fact is, profitably trading the Reverse Iron Condor, or any options strategy is entirely feasible. But it is only feasible when you have a robust risk management system incorporated into your trading plan. Beware the marketing of the “best” trading strategy that is going to solve all of your problems. That is an illusion that you should stop believing in. Just employ the three blocks of success; knowledge, hard work and discipline and you will be good.