The distinct between lottery and calls/put is that in former case seller of the ticket pays only a small portion of the overall proceeds in the form of winnings, options are a zero-sum game in the truest sense of the description – winner’s profits are loser’s losses. And the majority of loser’s losses typically come in the form of speculative out of the money plays.
Butterfly spread is a good strategy when there is not volatility. This strategy also has self protection against big moves. However this can also produce limited amount of loses when market makes big moves. This strategy can be executed with calls and puts.First let me take the execution of the butterfly spread using calls.
AssuredGain.com, educational-brokerage firm based in Chennai is happy to share with you a series of article titled “LIES, LIES AND DAMN LIES” written by Chief Adviser, Cyriac Kandathil. Please do read all the series and get enlightened. Trading options requires a completely different mindset. Speculative trading in options is very risky.
Most of us know about SIP or systematic investment plan to invest in mutual funds, and other financial instruments. As you very well know such investment works only when the price of assets in which one has invested increases and thereafter gets profit on selling those assets like stocks, gold, etc. at higher price than cost price.
I would like to thank all readers of marketcalls for your mails. As I was busy with my new sub-broker, I could not update here. Most retail traders buy put option to make money in falling stock or index. Have you ever wondered who is selling the put options that you are buying? Most likely, it is another trader who has the opposite outlook for the stock (bullish).
Let me clarify few things about options to help your trade options better.
Try to gain fundamentals knowledge of options, trading strategies, etc and after ensuring that you have complete knowledge start trading options. Never trade without learning completely about options.
Almost all option strategies involve some degree of risk, decide your risk level and then trade options. Please avoid taking naked option position such as sell call or sell put
“There are two kinds of investors, be they large or small: those who don’t know where the market is headed, and those who don’t know that they don’t know. Then again, there is a third type of investor – the investment professional, who indeed knows that he or she doesn’t know, but whose livelihood depends upon appearing to know.”