Is It Possible to Get Rich On The Stock Market With Options Trading?
Mostly yes if you are disciplined, willing to accept and manage risk and a keen eye for edge (There is no silver bullet). If it was that easy to make a profit from options trading then everyone would be rich. However, people like Jim Simons and Jeffrey Yass show that you can make lots of money from trading.
In options trading, time decay plays a crucial role. The traders have to play their moves quickly to get profits before the expiration of options. There are lots of stories associated with the stock market. Some of them are good, some are ugly, and some are bad as well. So, the question that arises in everyone’s mind is, can we become rich from stocks? So, in this article, you will find out, is it possible to get rich on the stock market with options trading?
Can You Get Rich Trading Options?
Can you make lots of money from options trading? It depends on lots of factors. You can use options in several ways, such as:
- Options offer you the leverage for your stock;
- You can use them as an existing investment to earn more cash (e.g. covered call);
- You can naked long put a stock like an insurance premium too;
So, my answer to this question is “Yes,” you can get rich in trading options. And most of the people want to hear “Yes.” So, the next question that arises in minds is, how can we get rich trading options? Four ways can help you to succeed in trading options. You can be successful if you have the ability to overcome fear and stress. Another most important factor is a risk.
Four Ways to Succeed In Options Trading
All four ways are interrelated. So let’s have a look at all four ways one-by-one.
It seems a little odd, but you have to do so to become successful in options trading. Improve your skills with study and practice. No one, yes, I said no one can predict the future price of options with certainty. What can you do? You can only make an educated guess about the direction of the future price of the stock. You will have to understand the behavior of the company that you have planned to trade, and obviously, it requires lots of effort and time. By improving your skills and knowledge, you would be able to make an educated guess, and in this way, you can succeed in trading options.
You can make educated predictions in different ways, but the main thing is to understand the company’s strategy. It is crucial to understand the products and competitors of the company. What are the strengths and weaknesses of the company? What is the current position of the company in the market? Does it have lots of competitors already? If so, it makes it difficult for new people to enter the market and make profits straightaway. What are significant risks? And look for all the other possible options.
You must have an understanding of the chart patterns. Most of the traders use a chart to help them gauge future prices. Look for the past movements of the stock. One thing should be clear that past trends and prices are not guarantees of future results. Chart patterns can be a useful strategy for short-term options.
To be successful in options trading, you should learn technical and fundamental methods. You must have the ability to read quarterly financial statements. It is not essential to take an accounting class for this. It is important to have an understanding of the company’s cash flow, margins, debt, and so on. You can take this report from the company’s website. If it is not available there, call them and ask for a report in hard form. Other factors such as wars, news stories, sentiment can influence the stock’s price.
Once you have an understanding of the fair value price, you can use the options value strategy. The best way to make future estimates is to use your mind instead of advice from a friend or a hyped-up website. You can take the help of expert analysts. You can discuss with them the fundamentals and charting. You can make use of other effective tools for research, trading, and charting.
It is most important either you do options trading or any other trading. Risk profiles will be different for different options strategies. It is never said that you can’t deal with risk. You can deal with it if you have courage and determination. Without understanding the risk you may end up losing all your money in a single trade.
Now, you have a plan, stick to it. Never involve emotions in trading. It is the most difficult thing to master. Always be ahead of time and know your position and strategy. For long-term options, your position can change. So, don’t worry if your position gets negative for a day, week, or month. If you have done research work, then you should be confident about price expectations. If you have managed risk, then a few bad positions wouldn’t affect your long-term performance.
In options trading or any other trading, patience is the key. Options positions have an expiration date. If you have long-term options, then you don’t have to check your position every day. Check it once a week and give your position time to play out. Over time you will become an expert in options trading and can earn a handsome amount.
So the question is, “is it possible to get rich on the stock market with options trading?” The answer to this question is yes, you can but by keeping a few factors in mind. There is nothing impossible in the world. If you can use your mind well, have dedication and patience, then you can do whatever you want to do. It isn’t easy to get rich in the stock market with options trading, but it’s not impossible. So, follow the above-given tips. You can become rich and earn lots of profit. You have to put continuous effort and dedication to get the best results.
Sky Hoon. Read Full Bio
Website Owner, Twitter-er
He has been trading since 2008. He started this blog to share the journey about option trading. He dabbled in stocks, bitcoin, ethereum (in Celsius Network), ETF (lazy Dollar Cost Averaging) and also built websites for fun. He used this as a platform to share my experiences and mistakes in trading, especially options which I just picked up.