Options trading has always been quite popular with many of the top financial institutions, but it has not always enjoyed the same kind of popularity amongst private investors.
So today I thought I would look at some of the reasons why people tend to stay away from options trading, and instead opt for forex trading or stock market investing instead.
1. Lack of capital
One of the main reasons why people avoid options trading is because you generally need a decent amount of capital behind you in order to start trading these markets. Whilst you can easily start trading the forex markets, for example, with less than $500, you cannot really do the same with options trading.
2. Too complicated
The biggest reason, in my opinion, why most traders don't even consider trading options is because they simply do not understand them. I can certainly relate to this because these are extremely complex instruments. It is pretty hard just to learn the basics, but to try to learn how to make consistent profits is equally as challenging.
3. Not suitable for short-term trading
A lot of people don't want to buy stocks for the long-term or trade options that expire several weeks or months down the line. Instead they would prefer to trade the forex markets, for example, which are more suitable for short-term trading. This is understandable because although it is possible to day trade options, it is very difficult to make money because of the wide spreads.
4. Profits are taxable
Laws do of course differ from country to country, but it is often the case that any profits that arise from options trading are fully taxable, which immediately makes this form of trading less appealing.
5. High volatility
It is common for people to take on less risk as they get older in order to maintain their savings rather than risk losing this money. So because the options markets can be very volatile, it is normal for people to turn to stocks or bonds instead.
So hopefully you can appreciate some of the reasons why you don't see a lot of individual traders and investors turning to options trading as a means of making some extra money. For many these markets are simply too difficult to understand, and more others they are simply too scary.
However if you can get your head around how they actually work, there are some great rewards on offer, and potentially some large gains to be had.
If you would like to learn about a brand new options trading strategy for 2013 that you can use to trade the options market, you might like to check out this Instant Options Income review and download the free blueprint that is mentioned in this latest blog post.
Use and distribution of this article is subject to our Publisher Guidelineswhereby the original author's information and copyright must be included.
0 Response to "5 Reasons Why People Stay Away From Options Trading"
Post a Comment