Trading Blog

You Are Better Off Trading Options!

LIM WEI XIANG

Apr 12, 2024 — 3 min read

I made my first $2000 in just 3 months into Options Trading.

TL;DR

Start earning from Day one!
Less risk compared to Forex Trading.
Simple strategy to follow and execute.
But…

Disclaimer: I am not a financial advisor. The content for this article is purely for educational/research purposes only and is merely based on my personal opinions.

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Based on common scepticism, many believe that options trading is more challenging to profit from compared to forex trading. However, this notion is far from the truth! Options trading is surprisingly easier and more profitable than it appears. I, too, was sceptical and avoided option trading for a good 2 to 3 years, choosing instead to invest 4 years in forex trading. Nevertheless, I am thrilled that I eventually ventured into options trading. Let me share with you the reasons why.

Start earning from Day 1!

Believe it or not, you can start earning income from day one by trading options! One effective strategy for this is the Wheel Options Strategy, which involves selling Cash-Secured Put and Covered Call options to earn the option premium immediately.

I’ve been using this strategy since day one of my options trading journey, and it has proven to be quite lucrative. So far, I’ve generated around $2000 USD solely from option premiums. What’s more, I’m reinvesting this income to execute more Cash-Secured Put and Covered Call options, allowing me to earn even more premium. It’s a win-win situation that demonstrates the potential for immediate returns in options trading.

Less risky compared to Forex Trading.

Forex trading carries a significant risk where a single trade could potentially wipe out all your capital if not approached with caution. The forex market’s unpredictable nature adds to this risk, as even a well-thought-out trading strategy can be overturned by sudden market movements, resulting in a loss of all your trades.

On the other hand, options trading limits the maximum loss to the value of the stock if it were to lose value over time. This scenario is more likely with smaller stocks compared to established giants like Apple, Microsoft, or Nvidia, where the chances of bankruptcy are extremely slim. This aspect of options trading provides a level of security and control over potential losses that is not always present in forex trading.

To add to that, we can leverage the income from options premiums to reduce the entry price of stocks further. This can be achieved by either selling Covered Calls or Selling another Cash-Secured Put, which generates additional income and lowers the overall entry price. Consequently, when we eventually sell the stocks, we stand to make a small profit due to the lowered entry cost.

Simple Strategy to Follow!

Unlike forex trading, which often requires extensive trial and error to develop a profitable strategy due to its lack of definite strategies, options trading offers established and proven trading strategies. Some of the most popular strategies in the options market, such as the Wheel Strategy, Call/Put Credit Spread, and Iron Condor, provide immediate earning potential.

These strategies are straightforward and easy to understand, making them accessible to anyone with a basic level of knowledge. Additionally, they can be executed correctly every time, offering a reliable approach to options trading that is not always present in forex trading.

But… Options Trading is Capital Intensive

Options trading involves setting aside funds for potential stock transactions if the options are assigned. Typically, you’ll need to set aside funds equivalent to 100 shares multiplied by the price of the stocks when executing an options trade. I would recommend starting options trading with a comfortable $20,000 to set aside. It can be extremely challenging to earn a decent amount if your starting capital is less than $10,000. This amount allows for more flexibility and reduces the risk of being undercapitalized in options trading.

Endnote

Honestly, trading options is much easier than trading forex. Forex trading can be seen as gambling with an edge, and once that edge is lost, it becomes pure gambling. On the other hand, options trading leans more towards the investing side. It involves selecting the best stocks for your portfolio and executing options strategies to potentially earn extra income, alongside investing in the stock itself.