Roger Scott is the head trader at WealthPress and has built a very successful career trading stocks, options, and investing. Options are not easy to get into and understand, which is why it’s essential for investors to listen to the advice of veteran traders like Roger Scott.
WealthPress’s mission statement is to improve ordinary people’s financial literacy, which is why Roger Scott has agreed to give us some tips on trading options. This is a list of tips that Roger Scott believes every investor and trader should know before they take the dive into options trading.
Options Give Much More Leeway in Investments
When you purchase or trade a stock, you want that stock to go up. If you believe a stock is going to go down, you won’t invest in it because you can’t invest in it.
However, with options trading, you can actually invest in the stock (in a roundabout way). Options give you many more options when investing and are a great tool for individuals that understand the market and its fundamentals.
Options Are Not a Lottery Ticket
Many people believe that options require luck and that the odds are always against the investor. This just isn’t true. Stocks can only go up or down; this means every options trade has a baseline percentage of 50% without any extra research.
Doing your research and understanding a stock is the key to increasing these odds exponentially and giving yourself the best chance you can have to turn a profit.
Going Against the Grain Can Be Very Profitable
There is no better scenario for an options trader than trading against the grain and being right. If everyone believes a stock is going to drop and you believe it will rise, then there is a lot of money to be made.
Believe it or not, the masses are wrong just about as much as they are right. The difference is that when they’re right, there isn’t as much money to be made. You shouldn’t blindly invest against a consensus. Instead, you should always do your own research and see whether there is a strong basis behind the consensus.
Options can have the Biggest Impact on your Portfolio
It is no secret that options can yield extremely high profits. Everybody knows this, but they also understand some of the risks. Options can expire completely worthless or worse.
With that being said, investors that are willing to take risks involved and dedicate the time necessary to excel at options trading will see astounding positive impacts on their portfolios.
Consistency is Key, Not Luck (Good or Bad)
Head Trader Roger Scott made this part very clear. You will make good trades that end up not working out. Even when all of the math checks out and you’ve done your research, sometimes it’s just not in the cards.
The same can be said from the other side. Some investors have made terrible trades and gotten extremely lucky. However, options are like Poker; it’s all about increasing your odds to profit over time. Trading options is not buying a lottery ticket.
You don’t do it one time and hope to get lucky. If you make good, consistent trades, you will end up in the positive.