Over the last couple of years, many people have been looking for ways to make money from home. Because of this, there has been a surge in options trading. The flexibility of options and the ability to hedge your risks when it comes to investments play a part in this as well.
But with so many people diving into this swimming pool, many people have wondered if they could utilize this to make a career change. When people start thinking like this, the first thing that comes to mind is whether they can make a living trading options. Before we look at this, there are several things that our team at Capitalist Exploits thinks you should understand.
By understanding these key points, you’ll be able to determine whether trading options is for you and learn how much potential is available in this industry when it comes to making it a profession. So without further ado, let’s take a look at the answer to if you can make a living trading options and how you can get started.
An option is basically a contract that allows you as the investor the option to decide whether to buy and sell a specific stock. This option allows you to choose a specified price within a specific time frame. This time frame can range anywhere from a couple of days to years, and when that timeframe is over, the option expires.
One of the biggest things to understand is that an option is not like a stock as it is not a deed ownership in a specific company. It’s a contract, and it means that you have the potential possibility to be an owner, but it has to be executed for it to be legitimate. This is one of the most important things that financial management consultants stress when looking to add this asset to your portfolio.
That being said, you have to understand that there are only two options when it comes to this type of investment. These are calls and puts. A call option is a contract that states you can buy a certain amount of shares at a strike price during the set time frame. On the other hand, a put is the right to sell a certain number of shares.
Is It Risky?
Simply understanding what options are is not the only thing that insiders suggest you understand. You have to know about the long and short-term positions that you can take. You have to understand stock positions and market volatility. But above all else, you have to understand the risks present when you are looking to invest in assets utilizing options trading.
Options trading can be a very risky proposition. This is primarily because it is such an intricate profession that requires a lot of research and dedication. It’s also risky because you’re taking your hard-earned money and investing in something that is not completely 100% foolproof. Of course, the level of risk depends on how active you are in the process.
You can hire people to do all the investing for you or opt to do it yourself. Depending on the strategies you choose can also play a role in how risky it is. Though option trading is less risky than other types of investments, it comes with a certain level of risk. It does allow you to hedge against those risks and tends to generate a pretty decent income.
How Do I Know If It’s For Me?
In the end, whether options trading is the right career path for you is really up to you. You have to understand why you’re choosing this path and the process that goes into making the investment.
If you’re unsure, doing tons of research and talking to other option traders may be a great way to decide if options trading is the right fit for you. However, if you’re already at the stage of asking if you could have an income from options trading, then we’re sure that you’ve already decided that this investment career is for you.
Successful Trader Traits…
Since we’re sure because you’re asking this question, you have already ventured down the path to making options trading your income, we thought we’d take a look at some successful trader trades that you might want to either cultivate or elevate to make your ventures more successful.
- Managing Risk – The truth is options are a bit of a high-risk venture. That means you need to understand the levels of risk you are taking and be able to manage that. To ensure your investment is successful, you have to manage and control the risk by utilizing the right strategies. It is a great tool to diversify your portfolio but just like with any other investment, it is not risk-free.
- Good with Numbers – Just like with any other type of investment, you’re going to be dealing with a lot of numbers. From implied volatility to expense reports, numbers are key to ensuring that you have a successful trading experience. This is why our team suggests that if you want to be successful, you need to be good with numbers. Though this may not be something you were born with, it is something you can definitely improve on through using online tutorials and other insider tools.
- Disciplined – There is a lot of research and waiting involved when becoming an options trader. This means you have to be disciplined in not only the beginning of the process when you’re looking to buy options but also when you’re looking to sell them as well. You need to be disciplined enough to follow your strategic guide as well as to maintain your research and tracking of whatever options you are looking to invest in.
- Patience – Just like with discipline, you’re going to have to be very patient. You’re going to have to wait for the market to be in the right position to buy or sell. Jumping the gun can actually hurt your investment and end up costing a lot of money in the long run. Patience is also vital when handling your emotions, so you need to be level-headed so that you can ensure your investment yields the right returns.
- Trading Style – You have to be willing to try a different approach until you find the right style for you. Every options trader will have their own trading style because every one of them is a different individual. Some like day trading, while others might enjoy swing trading. This is when traders bet on price movements over a certain amount of time. In the end, you have to be willing to try these different trading styles so that you can find the one that best suits your needs and personality.
- Look for Signs – You must be able to look at industry news and be able to dive deep into the signs. Many traders get hooked on the hype of something that is new and shiny, but they don’t dive deeper to make an educated decision. This is also where patience comes in because if you are someone who is looking to interpret this news, you need to be able to wait long enough to ensure that any hype is accurate.
- Always Learning – Everybody who opts to dive into options trading as a career or pastime will see some losses. But for a successful trader, those losses are just earned. In order to be successful in auction trading, you have to be learning continually. Learn not only from your mistakes but from new industry standards. Financial markets, just like any other market, are constantly changing, so you have to be able to go with the flow and embrace these changes.
- Flexibility – Just like with learning, you also have to be flexible when it comes to the market itself. Though you may do all your research and have predicted certain things, the market is ever-changing, and it can surprise you. You have to be able to accept losses and then move on. This means that being flexible when it comes to not only your strategies but also your wins and losses is key to being successful.
- Organized & Planning- Lastly, you have to be able to be full of plans and well organized. There are many purchases as an options trader that you’re going to make after having weeks and months of research. This means that to be successful, you have to be organized, maintain records, and plan all your trades out very thoroughly.
So can you make a living at options trading? The answer is yes, as long as you are willing to take your time and do your research (There are tons of resources online, including our newsletter, Insider Weekly). It can be a very rewarding and exciting path for the right person. This person has to be patient and dedicated. If they are, then this can be a very lucrative option.