Perhaps the biggest issue with spreads is that it gives people a false sense of security that they can trade a lot more contracts than they should be trading. With spreads, it's very hard to roll and manage that position since you constantly have the drag of buying an overpriced option. However, if you're a disciplined trader (don't trade too many contracts and also close out your positions early) then trading spreads is fine. Vertical credit spreads are dangerous because it reduces the amount of credit that you receive, it's difficult to roll / manage the position and people tend to trade too many spreads to compensate for taking in less premium. They end up getting assigned those 20 contracts which is too large for their account and their broker ends up forcing them to close out that trade at a massive loss. Trades below the option that they sold and above the option that they bought. I can't tell you how many times a trade who can sell 2 naked options ends up selling 20 vertical credit spreads and then they take a massive loss because the underlying stock
It's much easier to manage and roll a naked position as opposed to a vertical credit spread.Īlso, when you sell a naked option, it inherently reduces your buying power by substantially more than a vertical credit spread.Īs a result, it protects you against your human desire to engage in greedy activities. Selling naked options is a lot safer than selling vertical credit spreads because it The people that say that are not successful and profitable traders.Īsk them for their trading statements and ask them for screen recordings that show their entire transaction history. I know that a lot of people right now think that selling naked options is incredibly risky. So, once you're unsatisfied with other strategies you're welcome to come back and I would be happy to teach and help you. I'm OCD and fanatical about making money and optimizing my trading which has enabled me to become one of the best option traders in the world. My gut feeling is that you won't, but perhaps I'm wrong. You can try other strategies and I hope that you're going to make money. I can tell you that it really sucks when you lose money so if you are not satisfied earning 50% a year then you can still read my options trading example, disregard it and think that everything I'm telling you is bullshit. I have been surrounded by some of the greatest trading minds in the world and I still gave in to my inherent human greed to make more money as quickly as possible.
I graduated from an Ivy League University and I worked as an investment banker for five years (click for a video about my experiences).
#TRADING OPTIONS HOW TO#
I want to share with you my personal options trading example and how to trade options easier. If you're not satisfied with earning 50% a year then you're welcome to try whatever you think is better, and then learn from that experience. The reality is that if you try to make more money, you're probably going to end up losing all your money. They're not satisfied with earning 50% a year, and that's totally cool.
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