Probability is Essential
One might ask themselves why a person would consider selling options if the loss potential does not have any limit. As a matter a fact this is a big question mark in people’s heads when the subject of options trading comes up. The rationale that option selling is a very potential strategy if it is used correctly is because of the possibilities that are involved in them. Possibility or probability as well as statistics is what option trading is based on really. There are many people such as investors and option buyers that look at options as if they were a lottery trade in which they are aware that they are only spending a few dollars to play the game. If there just so happens to be a big advance in the stock or commodity, they take the easy route. However, this is not something that normally occurs, just like in the case of a lottery ticket, your odds for winning are very, very slim. These consist on trades with low probability and almost all of them will be the close to expiration, far out of the money options. Nonetheless, human beings still cannot set aside the thought pattern of a gambler which obviously may be something fun, however if one keeps on losing, they will not be able to hold out for long. If you are going to be an intelligent option seller, you will need to take the other side of the low probability losers and convert them into high probable winners. To go over this again, it can be very profitable to sell options given the elevated prospect of achievement if it is utilized in an adequate way. |