Why People Don’t Sell Options

Finance Articles | March 16, 2009

Selling Options can be very profitable. Even so there are 2 main reasons that people think selling options is a bad idea.

Selling options can definitely be a profitable way to trade the market, yet many people do not trade them. The top two reasons for this are.

1. Option selling gives you a limited return

Most people buy stocks and options and hope that they will go up and make them a ton of money. After all if you buy a stock there is no limit to how much it can go up and because of that there is no limit to how much you can make.

But even though you are limited on how much money you can make it often beats the return of just holding stocks. In theory stocks can go up to infinity in reality stocks move back and forth and go up slowly on average.

2. Option Selling can give larger risk

Another reason people don’t get into option selling is because people think that selling options is risky. And if you are new to trading and have no idea what you are doing they are right.

But selling options is just like every other strategy, there is risk but the risk can be managed and it can help you to make a great return over a longer term time frame.

Now that we have looked at some reasons people don’t sell options here are the two reasons selling options can be very profitable.

1. Higher Probability

Selling options can give you a much higher probability way to make money in the stock market. Suddenly stocks can go up sideways or even down a little and you can still make a profit from it. So selling options gives you a way which you can be right more often than wrong.

2. Risk can be managed

The risk of selling options can be managed and kept small just like stock trading. It doesn’t have to be some forbidden technique that everyone is afraid of.

For more on selling options visit http://www.stocks-simplified.com/option_selling.html

To learn how to create option spreads visit http://www.stocks-simplified.com/Option_Spreads.html

Article Tags: People Don’t Sell, Don’t Sell Options, People Don’t, Don’t Sell, Sell Options, Selling Options, Option Selling

Source: Free Articles from ArticlesFactory.com

ABOUT THE AUTHOR

When I was young I wanted to learn how to trade the stock market. So I traveled around the country listening to professional traders talk about how they are making money in the market. Now I understand how easy it is to make money in the stock market and started a site http://www.stocks-simplified.com to help others learn.