Can You Make a Living Trading Options?

Can you make a living trading options? Many do. Potential options traders need to know that options trading bears investment risk just like any trading or investing. It requires learning a lot of information, practice, diligence, and a willingness to learn from mistakes. So, can you make a living trading options? Yes, if you are willing to apply yourself, learn what you need to know, and continually audit your own trading results in order to constantly improve performance. Making a living trading options is easier if the trader abides by a few principles. These are to know the basics of the equity underlying the option. Decide how much investment capital to devote to options trading and trade within the limits of the margin account to preserve capital. Sell puts and calls only on equities that you know very well or be willing to lose a substantial amount of capital. Remember that you never have to trade if the conditions are not right or if you are confused about the market.

Options to buy or sell a stock can be bought or sold. The trader will decide which route to take based upon both stock fundamentals and technical factors of the underlying stock. For example a trader options trading CBOE itself will decide if the stock is likely to go up, go down, or stay where it is. Can you make a living trading options on stocks like CBOE? You can if you correctly assess the stock’s prospects and buy or sell puts or calls accordingly.

A very basic decision in options trading is how much capital to devote to the enterprise. The amount you will need will vary with how much you want to trade and how much you will invest in a trade. It will also have to do with whether you are buying or selling. Buying puts or calls may not always be successful but it will only cost the price of the premium. Selling puts and calls in the hands of experienced options traders is more profitable over the long run but it also can lead to occasional large losses when the market moves unexpectedly. Succeeding in options trading will depend heavily upon the trader staying very conservative when selling puts and calls and only doing riskier trading when buying.

In the end the answer to “Can you make a living trading options?” is, yes, if you want to apply yourself, remain diligent and learn from your mistakes. One sees figures to the extent that most options traders (85%) lose money. That means the trader loses money and quits trading. This is comparable to anyone starting a small business. A Dun and Bradstreet report of some years ago noted that a business with fewer than 20 employees had a 37% chance of being in business five years hence and a 9% chance of making it ten years. The same report noted that only a fifth of restaurants made it five years. The point of this comparison is that trading options is a business and in business the fit survive and make money and the unprepared find other work. Can you make a living trading options? The answer is definitely, yes. As with all business endeavors there is work to be done but in the end those who do the job right will prosper.

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