Option trading?

[wizmo]

Thank you for a few clarifications on the topic

Option trading?

@vargamon give a balanced example. don’t be bias towards options because you favour “lucrative” over “straightforward”. what you neglected to point out is that with every option you pay a premium which you forfeit regardless of which direction the price goes. If you guess right, then you first need the price to change enough to cover your premium before you see any profit, if it doesn’t change you lose your premium, if it goes the other way you lose your premium. now sure, you will claim losin…

[ryan9921]

@Dao

Options look safer but they aren’t, you can use safe-ish techniques to limit your risks if you know what you are doing, but it’s possible to lose more money than you have while CFDs are at least protected against negative balances.

Get the point you are trying to make but this is very generalising of options. There are many different strategies, most with clearly defined finite max losses and max gains.

[terdia]

Why I don’t support blaming trading212 for losses, etc, I do think most of the objections are based on assumptions, for example is there any data that shows people using trading212 are inexperienced and therefore should be treated as children (based on your apology)?

IMO the standard check is enough, people can loss money investing in stocks, options or CFD.

[ryan9921]

@terdia

for example is there any data that shows people using trading212 are inexperienced and therefore should be treated as children

Yeah - 76% of retail users lose money trading CFDs on 212.

[terdia]

Have you seen the number from Plus500?

[ryan9921]

Nope but your question wasn’t about plus500

[terdia]

My questions wasn’t about CFD losses either, the point is people loss money no matter the instrument used, agreed some have higher risk.

[RedSnow]

Option Trading, is 100X more harder, compared to CFD.

1. Your Stock can expire, (your trade has an set ending date, has only days or weeks and it must close in a loss if you do nothing in the wrong direction)

2. Need to learn much more to understand option trading

3. You have more painful trades with Option trading, because it can Expire, and then go in the direction you expected it to go. but your trade was already closed…ouch no choice…

4. Theta / Delta / Vega / Gamma

5. It is funny to see other people do it, kinda popular on reddit to see people win & lose option trading (Wall Street Bets)

[ryan9921]

Agreed, definitely much harder than CFD - the people on here who struggle to understand the workings of CFD would have no hope comprehending options.

But doesn’t mean they should be ruled out completely, they appeal to a very different type of trader and open up a new stream of income (that granted, doesn’t currently fit with 212’s business model) but doesn’t mean they should be cast aside.

[Dao]

the minimal losses basically only apply to those who “buy” an option put/call as they are the ones paying the premium and have the right to act upon the option.

a lot of people “sell” options as “easy money” and this is where you can lose a lot more money then you put in because you are obliged to fulfil the option if the other side activates it. no matter how poorly your position is doing overall, especially as so many sell options for assets they do not own, which forces them to then activate their own “buy” to fulfil.

@ryan9921
if you stick to just 1 side of options then the risk is limited, but if you do a lot of these strategies with them you open yourself up to a large liability of losses. no strategy can save you if the worst case scenario happens, and it requires far more individual manipulation than CFDs which is why I find it annoying when people try and pretend it is ‘safer’ than CFDs just because it’s different.

there are ways to use options, but most people just want to “trade” them which is where this disconnect in safety seems to be cropping up repeatedly. everyone who claims they are safe in general, only do a specific technique to earn their money and don’t mess with all the rest.

@Terdia it’s an anology just because without any tests, there is precisely no way to know exactly who is or isn’t prepared for what they are getting involved with. very skilled and experienced people lose money all the time, the inexperienced don’t stand a chance and are more often than no left worse off. for the market at large, it’s not that great for so many unexperienced people to lose money from poor decisions in the stock market rather than enriching themselves in a positive way elsewhere that could boost the genuine economy.

the losses stated for any given CFD provider don’t give the full story because we don’t know the scale at which people gained or lost, only how many people ended up turning a loss and the market works on the basis that the top 5% so to speak are the ones collecting the money from the other 95%.

when drones became a big thing globally, anyone who purchased and planned to operate one in most countries became required to get themselves and the drones registered, they took a rather simple online test to show they knew enough about what they would be doing so as not to harm themselves or others, and to avoid breaking any laws or airspace restrictions when using them. the result is those who don’t have a license get large fines, and those who have one can enjoy their drones with little worries and possess the knowledge that they can operate them in safe conditions. it’s not hard to get at all, but the education being made mandatory increased the quality of experience for all drone users.

I just think a similar thing needs to be in place for such a risky place like the stock market, because while it is our responsibility to get educated before risking our capital, it is too easy to skip this step and then face the harsh reality. negative balance protection and FSCS coverage for institutions is of little help if you don’t possess the knowledge of how to succeed to begin with.

Options are on the table, but not a priority because of the regulations work involved. people need to stop giving the impression that its easy to succeed with because it will mislead those who come here later looking for guidance.

@RedSnow I have no idea what #4 is about, and think currently it might fly right over my head LOL

[terdia]

Agreed, some kind of test is required.

[RedSnow]

Its alot of boring information about Option trading, but helps alot when you decide at which moment you want to buy in a option trade:
https://www.optionsplaybook.com/options-introduction/option-greeks/

[ryan9921]

I think (speaking for at least myself) when people on here refer to options being ‘safer’ they mean that if you know what you are doing, it is possible to clearly define risk with options whereas CFDs there are often too many unknowns to do this effectively e.g. trading suspended, widened spreads, leverage changes, increased swaps.

Also not sure I agree with “if you stick to just 1 side of options then the risk is limited”, there are many different strategies that mix buying/selling (sometimes multiple of) both puts and calls that have clearly defined maximum losses (see this link for example https://www.optionsplaybook.com/option-strategies/)

[Richard.W]

@AlexK

Actually I’ve no idea what you are talking about.

Neither did I. But I found this.

Urban Dictionary: Tendies

[developedbyed]

I have traded options for several years, if you think options are riskier then CFDs then you haven’t traded options long enough or you are just uneducated. Yes, selling buys and puts can inherit more risk but let’s not forget all the shady stuff that’s been going on for the past few weeks on CFD with random large spreads, increase in swap and not having the ability to trade certain stocks cause you know… they are going up…

[Dao]

those last few things have nothing to do with CFDs, those are issues faced by the platform. don’t try and mislead people by equating them as one and the same.

[developedbyed]

I agree 100%, those are issues on trading212, which makes me not want to do CFDs on trading212. Since there is no options trading, I will keep using IB

[Hectares]

For those who would like to learn about Option Trading, Tasty Trades Learning center is free and full of information.

tastytrade Learn Center

[obrienciaran]

@chrisgrounds

Options are far safer investments than CFDs, which are nothing other than pure gambling.

I’ve no idea why people keep saying this. Any DD or TA you can do on investing in shares, you can apply to CFDs. The only difference is the leverage, which when used responsibly is not a bad thing.

[developedbyed]

They are great!, thanks for sharing!