One of the ways that I make money is by trading options on stocks and futures. This is where the fun starts.
I got into options simply enough from being interested in stocks. I didn’t take long before I heard there was a way to make income and buy stocks you were interested in at cheaper prices than there current price, or even make money on the stock without ever owning it.
So, I actually spent a lot of time learning to trade options (thanks TastyTrade). I read many books and spent many lunch periods learning all I could. I loved it and was quickly spending a lot of my time doing it.
I don’t intend to teach options or anything with this site, there are already great resources for that (TastyTrade, as I mentioned, is a great one, but there are many others). But, options are a great tool for those that are interested in expanding their stock investing.
You hear a lot that options are risky, and they certainly can be, but they don’t have to be. You can choose the way you trade options. You can trade them quite safely and even reduce the risk of a standard stock portfolio. But, like all things investing, the more risk you take, the more potential reward, so there may be temptation to bite off more than you can chew.
It has happened to me. After years of successful trading through a strong bull market my options positions got hurt pretty badly in the big drop caused by the coronavirus. I’m not sure you can read too much into this considering the black swan nature of that event, but black swans happen. You’ve got to keep tabs on your risk with options. Overall, I have made much more money with options which I have been able to use on other things like investing in real estate.
Futures are much bigger products than stocks, so managing your risk is even more important. You get more leverage with futures, so again, more potential profit…. or loss. You’ve got to understand the products. But, if you are like me, it is a fun game.
Let me be clear. Options can be risky. They are initially complicated to understand. You have to spend an adequate amount of time understanding how they work. But, they are not too complicated for the average investor to understand and trade.
Ever since I got started in trading options and futures, I haven’t lost the excitement for it. I’ll admit, maybe I’m weird but its something for me that makes me excited to wake up for everyday.