Normal
Buying options is utilizing leverage, margin doesn't come into it. It's a valid and common strategy used by short term speculators. Sure, an option position has different profit and loss characteristics to the physical underlying; that's how they were designed as a hedging vehicle. It's also why they are attractive to short term traders willing to accept the added risk that comes with the potential for leveraged profits. Saying its a dumb way to trade is just ignorant. My most profitable trades have been with bought options, risking a know maximum dollar amount for over 500% return on many occasions. Sure beats a 1:2 R/R....What worries me about Bill's approach is the ability to contain loses to predefined % levels. My experience is with index and currency options, but id imagine ASX equity options have wider spreads and gap more. Maybe ATM it isn't an issue? What I can say though is that you need to have reflex's like a cat and it can be bloody stressful when things don't go to plan. You better love screen time and you better be able to execute without second guessing. Certainly not something I'd want to teach anyone but the most risk tolerant of experienced traders.
Buying options is utilizing leverage, margin doesn't come into it. It's a valid and common strategy used by short term speculators. Sure, an option position has different profit and loss characteristics to the physical underlying; that's how they were designed as a hedging vehicle. It's also why they are attractive to short term traders willing to accept the added risk that comes with the potential for leveraged profits. Saying its a dumb way to trade is just ignorant. My most profitable trades have been with bought options, risking a know maximum dollar amount for over 500% return on many occasions. Sure beats a 1:2 R/R....
What worries me about Bill's approach is the ability to contain loses to predefined % levels. My experience is with index and currency options, but id imagine ASX equity options have wider spreads and gap more. Maybe ATM it isn't an issue? What I can say though is that you need to have reflex's like a cat and it can be bloody stressful when things don't go to plan. You better love screen time and you better be able to execute without second guessing. Certainly not something I'd want to teach anyone but the most risk tolerant of experienced traders.
Hello and welcome to Aussie Stock Forums!
To gain full access you must register. Registration is free and takes only a few seconds to complete.
Already a member? Log in here.
