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🟡 MYTH vs FACT

1. Option Selling is Easy Profit : Actually options are not trading instrument, they are created for hedging purpose. Option buyers mostly lose money if they hold it for longer time period. So, now a days, many new comers started selling options without considering the risk. Options writing/selling is not guaranteed profit making way, the GURU of options sellers world, who introduced this writing strategies to the whole world, James Cordier, blown up his fund after 14 years of option writing experience. Check this link https://www.youtube.com/watch?v=VNYNMM0hXXY 

2. It is like an Insurance Business : A big NO! An Insurance doesn't guarantee you unlimited coverage, whereas a short position in option is coming with unlimited upside risk. It happens once or twice in a year but it comes with probability of unlimited loss, GUARANTEED.

3. Futures Trading also having Unlimited Risk : Futures trading comes with unlimited profit potential too! You can use Options to hedge your futures positions to manage the risk. Whereas Option selling can fetch you low reward than high risk.

4. Sop Loss can manage your Option Writing Risk : If you are selling options then you need to hold it as positional trades and it involves gap up or gap down risk, that is not possible to control with stop loss.

A fresh new comer shall not jump into option writing business without understanding the facts. By looking at profit screenshots, do not dream such returns, professional traders are highly experienced and they know how to do adjustments if the trade go wrong, they are always ready with big capital to use as additional margin during trade adjustments. 

Then what is the way out...!!

🔸Trade with at least 2:3 Risk Reward(RR) Ratio or higher...

The secret of surviving in stock trading is the RR. Nothing else is there to save you. If you can trade with even 50% accuracy then also you'll end up with making good profits. Many People will say that your half of trades are going wrong but they won't understand the secret of your money making strategy. 

It doesn't matter what trading instrument is your favourite, it can be option strategies, futures, cash or anything else but keep your RR intact. Thank you!

Comments

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