Options are effectively gambling on which way you think a stock will go, rather than traditional share investment, and has much bigger returns and losses.
Options trading is not “literally gambling”. If anything it’s literally selling insurance. I’ve made about $90k this year just selling calls against my stocks and puts for stocks I want to buy, with about a 90%+ win rate.
Anyone who purchases options is indeed gambling. I mean, you're not getting anything in return for your money like when you purchase shares to build equity. When you buy an option, if you're wrong you literally lose all your money.
Now, I know you're gonna say you can lose all your money when you buy shares, but no -- that very rarely, if ever, happens. If you buy a dividend stock than it's even better as a long-term investment.
The only parties options trading isn't "literally gambling" for are the ones selling the options like market makers (Citadel). They know people like to gamble and they're happy to take the other side of the trade because it's free money when they hedge properly (sounds like a casino, doesn't it?).
Nobody mentions how similar options trading are to an actual casino. I am a victim, as I made a dumb options bet for $8 and ended up with $70 in one day. From there I tried to make it more and more and eventually ended up losing more money than I put in, and a friend convinced me to just disable options and keep them disabled.
Trading options is extremely risky and a lot of people teaching it, teach it because doing it is normally not profitable and they have already lost their money.
Unless you have some huge edge, which no one does, options are the last place to spend your time and blow your money.
Learn something about how financial markets work before you make a blanket statement that options are gambling. Yes, you can gamble on options if you don't know what you're doing, but they are a financial instrument that can be used to hedge risk and make informed financial decisions that result in great rewards.
Options in particular are a trap IMO because they require a LOT of active attention to the market day to day, and in the end aren't really worth it. I also dabbled in options a while back, and ditched them after losing much more than I should.
I did learn a lot about the stock market while doing options though, so I guess that is a plus.
Unlike stocks and bonds, options are a zero sum game (minus fees). So they're like gambling in that sense. But they are a useful tool for investors to hedge risk.
The main issue with options is the time component. Now you have to bet on the direction and be pretty precise with the when.
Also, prices for these options (Tesla is a good example) aren't cheap. For example a bet that Tesla will be below $900 by Jan 19th 2024 will cost you about $250 / share at the moment. That means Tesla needs to actually be below $650 on Jan 19th 2024 before you make 1 dollar.
As long as you understand whats going on and what you are actually betting on, you are fine. But options have lots of 'gotchas'.
Presumably because this is classified as a form of gambling right? (how the stock market gets away with it I'll never know.) Given that options are a financial instrument that converts a prediction market into something you can invest in, I wonder if there is some other financial instrument you could work out here.
When gambling, the house "always wins" over time. With options trading, that's not always the case. Anyone with a gambling addiction would be far better off doing options trading - their chances are much better.
reply