Trading stock options can be one of the most profitable trading strategies.
Where else can you make upwards of 300% return on your investment in one day? But, as with most high risk investments, you can also lose a fortune if you don't utilize proper trading strategies.
Many people read stories of individuals making tens of thousands of dollars in a single day with one options trade and think they can do it also.
Some of these people go on to long careers trading options, but most will lose everything they have including the mega profits they made on their first few trades.
The reason for this is because options trading is mostly like gambling.
Yes, you can win big money but you can also lose very fast.
You need to study options books and learn all you can before you place any money in options.
It is just like any other skill and just buying a few calls on the hopes of a buyout or because some friend at the office gave you a hot tip isn't the road to long term profitability.
The key to long term profitability trading options is to stop gambling and start taking calculated risks.
We have done a few trades where we earned profits of over 1000%, but most of the time options traders shoot for profits of 10%.
They don't use options as their only trading vehicle, but as part of the overall strategy.
They purchase stocks in conjunction with options and buy calls while selling puts.
This strategy helps bring down their overall risk and while they might miss out on the home run, there chances of earning consistent profits become much better.