FREQUENTLY ASKED QUESTIONS
If option selling is such a lucrative investment strategy why haven't I heard of it before? For many, options trading has become synonymous with making big profits from small investments. Selling options using conservative strategies such as those described in my books do not have the potential for outrageous profits from any single trade. Selling options using the trading strategies in my books offer consistent small profits over a period of time. And by not being a get-rich-quick proposition these are less popular to investors who are looking for big returns on their small investments. Those seeking big profits from stock options do so by buying options and hoping for the best just like betting on gambling tables in a casino. On the other hand selling options is like being the casino operator where the option seller collects the bets and wins small amounts over a period of time.
Who should be using your options investment system? Definitely not those looking to make short term quick profits in the stock and options market. The program is intended for those who seek a safe, low risk investment vehicle to grow their capital steadily over a period of time.
How much capital do I need to get started in options? Only you can answer that question, but keep in mind that brokers would normally require a higher starting capital to trade options using my system. If your experience and skill in option trading is somewhat limited it would certainly be advisable to start at the barest minimum allowed by your broker and work yourself up as you sharpen your skills.
How often do you trade? Do I need to be at my computer every minute the exchanges are open? The number of trades depend a great deal on the amount of money you have invested and the number of option positions you have in a diversified portfolio. A small portfolio of say, $5K-10K where one has only one option position, may require only one trade or two in one entire month. If the stock market gyrates wildly there may be a need to do protective roll outs of that one position, in which case more than one or two trades may be necessary. On reading my books you will see there are not too many trades done to achieve the profitability desired. No, you don't have to be at your computer during the entire trading day or even every day because you can establish alerts points and when your underlying stock nears the alerts point you can then act.
What is the downside to your system? As mentioned above, trading activities are limited in number and frequency which could make it dull and boring for one who gets his excitement doing numerous trades in a day or week.
How will I know when to trade? Do your books give guidance on this? I trade in reaction to the market and not in anticipation of its future direction. Generally, I make a trade when the market has moved some distance from its position either up or down. Following this principle and the information given in the books together with the illustrations you will know when to effect a trade.
Does your system guarantee profits or capital appreciation? How about when the economy goes into recession and the markets are depressed? Nothing is guaranteed in this world except death and taxes. Even real estate, which was regarded by many as the ultimate sure thing when it comes to appreciation values, has its downturn as demonstrated by the state of todayís depressed real estate market. I will be honest and say that in a situation where the stock market goes in a swift and deep decline such as that of SeptemberĖNovember 2008 my system may suffer a similar outcome. I will hasten to add though, that the negative impact of a deep market decline will be much less for the option seller than if he were in any other investment, including safe harbor mutual funds.
Does your system apply to options on commodities and futures? I donít see why not. The mechanics of how options work are the same for stocks, commodities and futures. I personally trade mostly ETF and stock options so I canít say how successful it will be for the others. If one is an option trader on commodities and futures and would like to see if my system can be used successfully, the cost of each of my book is a very small price to pay for the potential rewards they offer.