One of the Biggest Mistakes Option Traders Make

Most people incorrectly use options to increase risk. [Jeff Clark's Market Minute]( One of the Biggest Mistakes Option Traders Make By Jeff Clark, editor, Market Minute Most people say option trading is risky. Novice traders often don’t take the time to learn the right way to use options. They jump right in – thinking, “I got this.” They gamble, blow up their accounts, and then walk away penniless, swearing off options forever. Even experienced traders sometimes get caught up in the allure of fast gains. They overleverage their positions – take a bigger position size than they should – and then take a hit. All the option traders I know, including myself, have blown up their accounts at least once. But it’s not the option that’s risky… It’s the strategy. And when used the right way, options are far less risky than trading stocks… Recommended Link [Alert: New Trading Interview (W/ Legendary Trader)]( [image]( For his Delta Direct research service… He’s got a winning track record of up to 89%. He owned a $200 million money management firm. He’s worked with Fortune 500 CEOs, pro athletes, and Venture Capitalists. And now, for the first time, he’s pulling back the curtain on his trading approach. He’s used it to give folks the chance to collect incredible gains like: 106% in 7 days… 176% in 36 days… 186% in 8 days… and 195% in 23 days. Of course, nobody has a 100% track record, so not all his plays are winners… But, according to his Delta Direct research service… In one year alone, he won 33 out of 37 times using this trading approach. He bets 9 out of 10 Americans have no idea this trading approach exists… Let alone how to properly use it… But that’s why he revealed everything in this brand-new interview. [Click here to watch it.]( -- You see, most people use options the wrong way. Most people use options to increase leverage to get more “bang for their buck.” In other words, most people use options to increase risk. That’s wrong. That’s the exact opposite of what options were designed for. The options market was created so investors could reduce risk. Options allow investors to hedge their positions… And to risk much less money than they would buying a stock outright. Let’s say you want to buy stock in Company X. It trades for $10 a share. You could put up $1,000 to buy 100 shares… But you can control the same amount of stock with one option contract. You can buy a contract for, let’s say, $50… And leave the other $950 in your account. If Company X’s stock goes up, you’ll make money. If the stock goes down, the most you’ll ever lose is that $50. That’s a 100% loss… But it’s a lot less than potentially losing 20% or more of the $1,000 you risked buying the stock. Free Trading Resources Have you checked out Jeff's free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. This is a simple example. And it’s the simplicity that proves my point. Options allow you to risk much less and profit just as much as buying stocks. But that benefit disappears if you overleverage the trade and take on a larger position with options than you would otherwise take with the stock. That’s the biggest mistake most novice option traders make. Instead of replacing a 100-share purchase with one call option, they take the entire amount they would have allocated to the stock and buy a much larger position with the options. Rather than buying one call option for $50 and leaving the remaining $950 in the bank, novice traders take the entire $1,000 and put it into buying more call options. They end up buying 20 call options to try to get more bang for their buck. What would’ve been a 100-share purchase has turned into control of 2,000 shares. Instead of using options to reduce risk, they’ve increased their risk 20 times. [SCREAMING Buy Alert]( Losing 100% on an overleveraged trade would be a disaster. And it’s why most folks think option trading is dangerous. But it’s not dangerous if you trade options the way they were originally intended as a way to reduce risk. Limit your option exposure to control just the number of shares you would normally purchase. Leave the rest of the money in the bank. Then it won’t be so bad to lose 100% on an option trade. It’ll almost always turn out better than what you could have lost on the stock. Best regards and good trading, [signature] Jeff Clark Reader Mailbag Why did you start trading options over stocks? Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com. 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