8 reasons why you’re losing money trading options 2

8 Reasons Why You’re Losing Money Trading Options I can’t put my name on this! Those were the thoughts that went through my mind after I reread the first edition of my current book, Fearless Investing With Options. It finally clicked in my head, when I received an email, from a kid in college that read the first edition.

In the email, he asked, “what do I do next?” Now, he wasn’t the first person to ask that question, however, it finally gave me a push needed, to reevaluate how OptionSIZZLE goes about teaching people how to trade options.

The first version didn’t have a direct pathway… and that pissed me off! I told my editor, we needed to make an overhaul. I wanted to make this book a must have for anyone starting out with options.

The end result?

I created something I’m now very proud of. Fearless Investing With Options, is the book I wish I had before I put on my first options trade, which lost $2,000.00. When I was creating the revision, I wanted to figure out how I can take someone with no knowledge of options and

provide them the necessary information, to be able to understand options well enough…that they can put on their first strategic trade.

Of course, if you’ve started trading options with little luck…this ebook can help you too. Not only does it cover the basics…but it also introduces my process, how I trade, how I filter for opportunities, how I structure positions…handle winners and losers.

With that said, I’d like to share with you, some of the reasons why majority of option traders/investors dramatically lower their chances of making money. You may be dealing with some of these issues now…I know I have in the past.

Reason 1: Direction vs Strategic For whatever reason, the majority of investors and traders focus on being stock pickers. That is, speculating on whether or not a stock’s price will either go up or down. However, with options…we’re allowed to be more strategic. In fact, instead of trying to be a stock picker…we can structure trades that are based on volatility and not on one specific market direction.

The market is random, why do you think the majority of fund managers underperform?

However, with options, we can focus on strategies that a have a high probability of success.

These include strategies that take advantage of high implied volatility by selling premium around binary events.

Look, I believe that you should have a few directional plays, but your whole approach shouldn’t be that way. Also, when I chose to play direction, I tend to follow the smart money, those who have skin in the game.

Reason 2:

Trading Too Large AKA Having On Too Much Risk

Now, if you’re inexperienced and you stack most of your chips on one or two option plays…and for some reason, they don’t work…guess what?

Punch to the gut and lose your money!

Of course, one of the biggest mistakes option traders make is that they size their trades too large, relative to the account size. Obviously, this increases the probabilities of drawing down their account and potentially getting a loss they can’t recover from.

Options are leveraged products. Some strategies carry greater risks than others. Obviously, you should be aware of the risks of trading options. Also, it’s important to understand how your broker measures risk on marginable option positions.

In regards to undefined risk positions, most brokers estimate margin based on a two standard deviation move. As you can see, knowing how to size, while using the power of leverage, will determine how successful or not your trading will be.

By the way, I wrote a whole article about this very topic, it’s called: Why Size Matters; Especially In Options Trading.

Reason 3: Don’t Have Or Know Of A Reliable Strategy Obviously, to know what works and what doesn’t, requires experience. That’s why learning from someone with experience can potentially save you time and money. Now, that doesn’t mean you won’t have some losses along the way…it just means you might avoid some.

For example, the strategies that we teach and write about at OptionSIZZLE, are not new or proprietary option strategies. It’s about knowing what, why, how, and the “what if’s” on all the strategies… so they can be used in the correct situation– win or lose. On the other hand, too many retail option traders focus too much on buying options or put on strategies that don’t match their market opinion.

Remember, an option strategy is just an expression of your market opinion. That’s why it’s important to know what strategy benefits the most from each idea…and understand the probabilities behind the strategy.

Once you’ve figured out what kind of option investor you are, that is, after you’ve had success.

You want to focus on your strengths and avoid style drifting.

Reason 4:

Fear Of Losing Money

There’s no guarantee in anything in life, especially in the market. That is why I love the quote, fortune favors the brave. Did you not wear your seatbelt today? Were you texting while driving?

All those things increase your chances of being involved in an accident.

Now, if you still drove…that’s pretty risky to me. Look, you can put your money in a CD if that makes you sleep better at night. However, did you know that the true inflation number last quarter was 6%. That means your little 1% CD is losing money…while helping the bank make more.

My point, you have no choice but to invest. Risk is always going to be there. I’m not saying to be stupid about risk, like most are…who tend to lose lots of money in the market. However, what if you were in Vegas and you knew the slot machine paid out 60% of time…over the next 4 hours. Would you dare step away from that slot machine?

Why are some investors so scared to lose money? Well, I’m not a psychologist, but I do think a couple of the reasons are a lack of confidence and preparation.

Having success will give you experience on how to handle losing situations. When you lose the right way, you’ll learn even more from trading wins. So many investors/traders don’t define their risk before entering a position, this is a must. It won’t avoid you from losing, but it should help calm your nerves about losing because you’ve outlined your line in the sand.

Reason 5:

Following Too Many Mentors/Gurus

Now, there is nothing wrong with learning from someone who has a strong options background. However, you want to learn objectively and develop into your own options investor.

Searching for the holy grail…jumping from one expert to another…one system to the next.

I’ve been on both sides of the fence and have gained some valuable experience through the years.

There’s a lot of noise out there… my job is teach the fundamentals and help you from getting sucked into believing all the hype. If I can help you set rational expectations and introduce you to trade strategies that have a high probability of success. I believe that could be the game changer for you.

If you’d like to hear more about this topic, read: Why You Keep Losing Money Following Trade Ideas.

Reason 6: They Think Professionals Know More The reality is…no one really knows what will happen in the future. That’s why I don’t really stress about things I can’t control. More so, focus on the things that I can. For example, how much exposure I want in the market… and defining the amount of money I’m willing to make or lose on a trade, which is always dictated by what the market is showing me.

How many people predicted that crude oil would be trading below $46 a barrel this year?

Not too many. In fact, several professional traders and firms blew out trying to pick a bottom in crude oil over the last 4 to 5 months. Heck, just last week, FX broker, FXCM, had to be bailed out after the Swiss National Bank decided to drop its peg to the euro.

There are certain things we can control, like what to trade, how much exposure we want to have, what strategy to select etc.

In some ways, we have an advantage over the pros. You see, for the most part, they have to

be fully invested to try to generate the most revenues. But there are times, when no one has a good feel for the market or trading becomes very difficult. As individual investors, we can opt out from being in the market and stay in cash if we want.

This is a luxury they don’t have. The professionals don’t necessarily know more than us. The reason why they try to project that, is because they need a reason to put your money to work, if they don’t have it in the market, they don’t get paid. They aren’t strategic with your money like you think they are.

Reason 7: They Are Too Stubborn To Define Their Max Profit I can’t tell you how many emails I’ve received from people telling me, that they just want to buy calls and puts. Consistently picking direction is a tough game. However, if you’re buying options, you’ve made the game even tougher for yourself.

Why? Because you’re not only playing a direction…you’re also long volatility. That means you’ve got a directional and volatility bet on at the same time. When profits are “undefined” traders have a hard time figuring out when to get out. This indecision often leads to emotional reactions.

Many of the strategies I employ have defined profit potential. This allows me to take a lot of the guesswork out…you know, like when to sell and what is a good point to take profits. With that said, I’ve got a clearly defined exit strategy on my positions.

You can read more about it in these articles: Greater Profits In Less Time On Your Option Trades & 3 Ways To More Profits & Know When To Sell Reason 8 : They Don’t Put On Enough Trades Another frequent question I receive is, what is my best trade? I usually don’t like to answer that one. You see, for me, it’s not about one trade. It’s about trading opportunities where the odds are stacked in your favor. From there, I let the numbers play themselves out. Of course, I’ll go through a stretch of losing. However, I know that if I stick to my plan, that the numbers will eventually go back in my favor.

As mentioned earlier, if you lack experience, you don’t want to be overly concentrated on one trade. Since I tend to sell a lot of premium. I position my trades, so that if a two standard deviation move or greater were to occur…it wouldn’t destroy my account.

It’s all about consistency…so stop searching for those home run plays. If you get them, great…but don’t expect to get a home run every time you get to the plate or you’ll end up

striking out a lot more…

Fearless Investing With Options

I wanted to address all these reasons in Fearless Investing With Options…in much greater detail. The goal I had, was to take you from a beginner all the way to being able to put on your first high probability trade. Like I mentioned earlier, It’s basically the book I wish someone gave me when I first started in this business.

If you’re struggling with options…or lack a proper foundation…. then you need to purchase a copy of Fearless Investing With Options.

In the Fearless Investing With Options, I discuss: 

The differences between stock and options investing



The basics of calls and puts–all the way down to the option Greeks



Why volatility matters and how to generate ideas from reading option volatility



My approach: How I go about generating ideas, selecting time frames and managing

trades



All considerations behind placing your first options trade



An introduction to unusual options activity and the SIZZLE Method



Actual trade case studies…and much…much more

You can instantly download the digital version right now. I’m not sure on when or if the print version will be out, but you can save now and get it for a limited low price of $14.95.

Also, it comes with my 30 day “if you’re not happy, I’m not happy guarantee.” If you’re not in love with Fearless Investing With Options within the first 30 days of purchase, just email me and I’ll refund your purchase with no questions asked.

Click Here To Purchase Your Copy Today Now, I’d love to hear from you. Which one of these reasons most resonates with you, and why?

Or, what do you do to help yourself avoid these mistakes?

To your wealth, freedom & options!

P.S. Leave your comment below and the best one will receive a free copy of Fearless Investing With Options book.

Hi I’m Josh, and I’m a finance guy. I cut my teeth in the markets on the Chicago Mercantile Exchange, so I saw firsthand how the “sausage was made” – and it usually wasn’t pretty.

Because I quickly realized that fund managers only care about getting their fee's first even though 95% of them underperform the overall market.

That didn’t sit right with me, so I left that world – And I discovered how to use my financial know-how to empower the little guy by using high-powered investing techniques – including the only “real time” market indicator the pro’s use to spot future price direction.

Now I’ve shared my message with over 129,000 people like you, and everyday investors have suddenly started making money in the market for the first time. Make sure you visit

http://www.OptionSIZZLE to access your FREE report and eBook that will teach you how to trade options successfully to help you create wealth, freedom & options for you and your family.