Hello, my friend, and welcome to this tutorial on Selling Options vs Buying Options. In this post, we will discuss some big misconceptions about selling options for income and for a living explained for beginners. Enjoy!
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Selling Options vs Buying Options – Video
Hey, my friends. Today, we’re going to discuss options. Here’s today’s topic: “Is selling options much better than buying options?” This is a typical misunderstanding that selling options is better than buying options. So, let’s discuss the reality. Let’s speak about the truth.
The marketing hype around the options sector is they say “Yes, that selling options is much better because 80% of options expire worthless”. So the idea is the 80/20 rule.
80% of the individuals are usually wrong, and it holds true that most individuals do lose money trading: options, futures, Forex, stocks, whatever, and so this does tap into a thing that all of us have a preconception of that many people are most likely to lose money.
So it’s the stupid people that are buying the options. They expire worthless because they’re losing cash, they’re losers; not in a derogatory sense of the term, but just in the literal sense of the term, so let’s take the other side of their trade, and then we’ll be the winners, we’ll be the smart ones to sell them the positions that they’re losing on. That all sounds great. Now, who says this?
Look for Straight Facts – Selling Options vs Buying Options
Who says that 80% of options end up worthless? This guy. He is the guy who originally said this. That’s Crazy Kenny’s Ninja Samurai Underground Secret Illuminati Options Course right there and I believe, if my recollection of options trading history is correct, that Crazy Kenny is the one who came out with this originally – that 80% of the options expire worthless. I’m not certain, don’t hold me to it.
Okay, don’t hold me to it. But that’s just passing by memory here. So let’s go to a different source. Do most options really expire worthless?
The response is, No. That is wrong. Why don’t we go to a more credible source? When I go for facts, I’m gonna go to the Options Clearing Corporation, and what they’ve reported in their stats is that 72.5% of option positions are closed by the seller; okay, they close by selling the option I should say. So the person that bought them, 72.5% of them actually sold the option before expiration. 6.6% actually bought the stock, they exercised the option, and only 20.9% expired worthless.
So, like a lot of things in trading, pretty much the precise opposite holds true.
You hear that 80 percent of options end up worthless. No, it’s actually the opposite. 20% end up worthless.
The Truth About Selling Options vs Buying Options
Well, that kind of puts a whole different slant on this issue of “Is selling options that terrific of an idea because 80% of people are losing money on them if they buy them.” It’s the exact contrary.
So, let’s speak a bit about buying options versus selling options. We’ll place some buying options over here, we’ll put selling options over right here and, of course, this is simply an overview that we’re talking below today. There’s a whole lot even more specificity we can get involved in, however, for today, this is introductory level stuff.
In general, buying options have a far better risk-reward ratio; meaning, your risk is smaller and your reward is bigger. Not always the case depends on the options strategy used, however, buying options can have a really huge reward if you do these particular sorts of options strategy that we provide. For instance, selling options, usually have a worse risk-reward ratio, so you’ll be running the risk of more money to make less money. Well, why would you do that so right away, it appears like buying options is much better, obviously, things are never ever fairly that neat and tidy, so the inverse happens to be true when it concerns the win-loss ratio.
Understanding Risk-Reward Ration When Selling Options vs Buying Options
So, again, buying options generally had a worse win-loss ratio than selling options. Selling options, one of the factors poeple like them is that you generally have more wins than losses and for the typical person, including myself, frankly, we like to have more winners than losers.
Now you can have a lot more losers than winners, but still make money if your risk-reward ratios are phenomenal and there are specialist traders that earn money constantly that way, so both ways work. One of the exciting things about buying options is you can produce some big profits, homeruns, huge money. Do they happen that frequently? Not necessarily, not really but again when they do happen, they’re truly amazing, and they can substantially transform your life. As well as with selling options you’re typically taking in smaller profits consistently.
Alright, therefore, not quite as exciting emotionally, but we’re not supposed to trade emotions anyway. Therefore, again, there’s a case to be made for both.
At Top Dog Trading, We Get the Best of Both Worlds
So, here at Top Dog Trading, what do we usually do? Well, here at Top Dog Trading we like to get the best of both worlds. So we do both; we sell options for consistent weekly income, so we’re pretty much doing that consistently. Selling options brings in income every single week and after that, we’re also trying to look for options buying opportunities, we’re doing that for the large windfall profits. Therefore, it’s wonderful to have a nice income, steady weekly income, that you can rely on and pay the bills and so on.
However, then I gotta tell you, when you struck those big windfalls, make a few thousand bucks, ten thousand bucks or whatever it is depending on the size of your trading account – Boom, Wow! That is life-changing. Not only is it exciting, again, we do not want to get caught up with the emotion, yet it can truly make a big, dramatic difference in your life, your financial life, and your relationships. Let’s face it, stuff’s expensive nowadays, so the small income, that’s cool, it’s kind of your ground-level financial plan, but when you got kids like I do in college, two kids in college now. I have lots of different expenses, and tax time comes around and Uncle Sam always seems to want to get more than his reasonable share. So after that, you have unanticipated surprises, health issues, emergencies whatever. So it’s just sort of nice to make some huge money from time to time, as well as to get those windfalls. Well, those come by buying options.
Look for Buy and Sell Opportunities for Options
So there are various times when buying options and selling options are more advantageous, different types of market conditions. So here at Top Dog Trading, we educate how to do that, how to analyze that, and both can happen at the very same time, not in the same market in any one given market in index or a futures market or forex market or a stock market, by the way you can trade options and all these different things, commodities, there are times when it’s advantageous to sell, other times when it’s advantageous to buy. Fortunately, we have all these different markets we have access to now. Therefore, we can look for the markets when right now, it’s advantageous to be selling and get our constant weekly income.
Yet, at the same time, we can be looking at another market where the condition is perfect for buying options. And that’s how we create a portfolio, an options portfolio, to do the best of both worlds. So that’s it for this lesson. We kept it under 10 minutes, which is our regular time.
And finally, I am offering one of my favorite trade strategies called the Rubber Band Trade. Absolutely free. And I want you to go and make some money. Try before you buy, or well, actually try and never buy because there’s no charge for this trade at all. And I’ll give you the setups, the exits, all the rules for it. It’s an objective rule-based method based on price pattern action that I don’t think anyone else teaches.
I’ve never seen anything else teach this particular price structure. So go get that by clicking on the green icon in the top right-hand corner of the video there, or by clicking on the green button below, and that’ll take you to a page where you can opt-in, get the video for the rubber band trade strategy, along with some other great free tutorials, one of my little mini-courses, absolutely free, courtesy of Barry Burns here at Top Dog Trading.
GET MY FREE MARKET ENTRY TIMING INDICATOR
BTW, if you’re interested in the indicator that I use personally for very precise entries and exits. I’m happy to share that with you. Just send me an email at firstname.lastname@example.org, and I’ll show you how to get access to that indicator.
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