This is why I never buy options (and neither should you) I'm going to tell you one of the saddest (true) stories in the world… and it's a story that I have seen repeated over and over again throughout my two decades in options trading.
Go here for trades that win +80% of the time.
It begins with an investor who started posting on an online options forum a few months ago after he made a BIG win.
You see, like most options traders, his strategy was to speculate on the price movement of a stock and then buy calls if he thought it was going up and puts if he though it was going down.
The appeal is that you can take a cheap initial investment and potentially turn it into A LOT of money.
That's exactly what happened when he turned $22,790.64 into $45,535.65 for an 87.10% gain… in just a few days.
Here's the screenshot from his brokerage account: Everyone was very impressed…
Five months later he posted again. His account had grown to $159,891.29 and he just made an astounding $183,291.71 profit in 5 minutes buying options on ALGN.
Here's the screenshot: "See?!" Everybody said – buying options works! You can turn even a small amount of money into literally hundreds of thousands of dollars!
Boy… was this guy on a roll.
The next thing he did was buy SPY puts. The trade wasn't going his way until Trump made an inflammatory tweet about the trade war with China and – in less than a minute…
…and RIGHT before his option was about to be worthless….
BOOM: Out of pure luck, he bagged a 74.95% gain in less than a minute for a $277,109.88 profit…
Then, after the selloff, he figured SPY was going to rebound, so he bought calls… Whoops! There goes $306,446.43 – 60% of his portfolio.
So he doubled down – SPY MUST go back up after such a sudden and severe selloff, right?  In less than a week, he lost 84.79% of his portfolio.
But the final blow came the week after.
He announced he was buying calls on CGC betting it would go up.
It didn't – his account was wiped out to just a little over $5,000 (he didn't post a screen shot of that…and disappeared from the forum).
This kind of horror story is common in the world of options, which is why so many people are "scared" of them!
You see, someone that buys an option has a lot of things going against them.
The first thing they have going against them is pure odds.
The best odds they can hope for is a 50/50 coin flip chance that a stock will go the direction they want.
Sometimes, when you flip a coin, you have a string of "predicting" the right outcome.
For example, you may call "heads" 10 times in a row and the coin may land on heads 10 times in a row.
You may think you're "onto something" and even people around you might think you're onto something.
This is how people get roped into those bogus trading services.
But if you flip that coin 1,000 times…or 10,000 times…. the odds are going to come out to almost exactly 50/50 every time.
Your string of winners is going to disappear and along with it the "edge" you imagined you had.
Click here to see how to put the odds 80% in your favor.
The other thing Options buyers have working against them is TIME.
You see, when you buy an option there is something called "time decay" on it.
The closer the option gets to "expiration" of the contract, the less it's worth.
That's why you can even be RIGHT with your option and still lose money.
In fact, one study showed that 80% of all options contracts expire worthless.
So, the question is, if there is so much working against you when buying options, why would anybody who isn't just a risk-taking gambler looking for cheap thrills want to actually trade them for reliable income and growth?
What Happens If You Take The OTHER Side Of The Trade? And SELL These Options?
There are two ways we could look at selling options…as a casino or an insurance company.
Casino: Every day hundreds to thousands of people give you money hoping that they win big on a gamble. And sometimes they do. But the amount of people giving you money far exceeds the amount of people winning any money. Thus the odds are always in your favor. If 100 people are paying you $20 each (total of $2,000) to bet a ball lands on red or black for a $100 prize (a 400% ROI for them) and 10% of them win that jackpot, then even when you pay out $1,000 in prizes, you're up $1,000 yourself. And although those 10 people who won are happy…90% lost. And guess what? Those 10% that won will come back to the gambling table over and over – making you rich.
Insurance Company: What is an insurance company…really? Let's take a company that offers fire insurance. They take money from thousands of people every year who want peace of mind in case their house burns down. The insurance companies know that the overwhelming majority of MOST of these homes will NOT burn down over the next year. If they don't burn down, you keep the money. If they do burn down, you pay for the house. But because the number of people paying you a "premium" for insurance far exceeds the number of houses that actually burn down – the odds are always in your favor.
Both of these examples reflect your advantage as a seller of options.
In fact, when we sell options we have a couple of other things in our favor…
- Probabilities: We have a concrete probability in our favor, often between a 75% and 90% probability of succeeding in our trade (we can choose our probabilities as well)
- Time: When someone buys an option, time immediately starts eating away at the value of the option. But for the seller – time decay is in our favor. The less money the option is worth, the more premium we get to keep. Remember, if 80% of options expire worthless, it means 80% of people selling those options made money.
Here's how you can put both time and probabilities to work for your portfolio.
So Why Isn't Everybody Selling Options If It's So Great?
The short answer?
It's boring.
The thrill of instantly making 100%...300%....500% or more in a matter of days or even a few short hours isn't there.
The adrenaline rush isn't there.
And also, with options selling, we're not pulling in those huge gains. We're making consistent 10%...20%...30% gains.
Now, I don't know about you, but the idea of being consistent over time, while beating the market year over year, is much more appealing than gambling in the off-chance I turn $20k into $600k.
In fact, I talk more about this idea and the advantages of options selling in this video:
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