How To Option Trade And Manage Risk

By Johnny M Junior

You know, I've been trading options for about 10 years now, and during this long time endeavor to achieve success on the stock market, I've made a lot of friends along the way. I've met numerous option traders, probably somewhere in the hundreds, and the truth is, there has only been a handful that were making money. So I wonder why there are so many people out there investing in the stock market when most of them only lose their capital.

This is a very remarkable topic we will discuss. Firstly, despite the risk of losing money, I think traders are enjoying the challenge that goes along the profession. We enjoy looking at probabilities, analyzing trade scenarios and doing the research. We are amused by dealing with the stock market and options, and the challenge is the very factor that drives us to push even further. There is an emotional drive that makes us want to improve; it's the competitive nature within us.

Another reason why a lot of investors stick with option trading even though they do not find immediate success is because it's a profession that involves a lot of creativity. There are literally an infinite amount of option strategies that can be created if you have an open mind. This to me makes option trading a never ending world of exploration.

But the question remains. Why are there so many option traders out there that do not make money? The common answer to this question is that your average option trader does not know how to properly adjust an option position. While this statement is somewhat true, I don't think it's actually the answer that we are looking for.

Until recently, I hadn't realized what the underlying issues of the problem were. Failure in option trading is not entirely attributable to a trader's adjustment strategies. Honestly, the most experienced option traders have mastered both money management and making sensible adjustments to their portfolios. Failure sets off from the very moment the trade is started. Being a good option trader and having risk management skills alone cannot guarantee long-term success in trading options unless we learn to construct option trades with a lower-risk factor from the very start. This is the key to long-term success in option trading.

I've recently come to this realization by studying with San Jose Options. Through their course I've learned to construct trades that are safer than anything I had ever seen before, and even though the risk is much lower, the probability is still very high and the return is as well. So if you feel that you are making all the right adjustments on your option trades, and you are still losing money, then most likely the problem is not in your adjustments. Your trades are set up for failure once they are initiated. Good luck with your option trading, and once again, it's very nice to have met yet another trader along the way.

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