This Mistake Could Blow up Your Account

It’s stupid to use options this way… [Jeff Clark's Market Minute]( This Mistake Could Blow up Your Account By Jeff Clark, editor, Market Minute Don’t do stupid things. That’s a good rule for life in general. But it’s an especially good rule for option traders. Like most good rules, though, we don’t really understand their importance until we break them. And when it comes to trading options, doing stupid things can be an expensive lesson. For example, it’s stupid to use options to overleverage a position. The options market was created so investors could reduce risk. Options allow investors to hedge their positions, and to risk much less money than if they bought a stock outright. But like most good ideas on Wall Street, options quickly turned into vehicles to “get rich quick.” So, we forget about the “risk” side of the equation, and we focus only on the “reward” side. We get caught up in the allure of fast gains. We take on bigger positions than we should. And then we blow up our accounts. That’s stupid. And that’s also why many folks who’ve traded options this way will tell you that option trading is risky. But it’s not the option that’s risky. It’s the strategy… Let me explain… Recommended Link [Weird crypto “loophole”]( [image]( [There’s a little-known crypto “loophole” you can use right now…]( For the chance to make 660%... 810%... Even 1,925% or more from Bitcoin... In a matter of days. Best of all… This ”loophole” works whether Bitcoin goes up to $100k or falls down to $10k. [Click here to learn more.]( -- Let’s say you have $10,000 to invest. You can choose to buy 100 shares of Company X at $100 per share. Or you can buy one call option contract – which gives you the right to buy 100 shares of Company X – for, let’s say, $400… and leave the remaining $9,600 in your account. If Company X’s stock goes up, you’ll make money with the call option since it allows you to buy 100 shares. If the stock goes down, you’ll lose money. But the most you’ll ever lose is the $400 you paid to buy the call option. Even if Company X’s shares drop by 20% or more, the biggest hit you’ll ever take is that $400. Your remaining $9,600 is still sitting in your account. Yes, losing the entire $400 you spent on the call option is a 100% loss on the trade. However, that’s still a more favorable outcome than potentially losing 20% or more of the $10,000 you’d risk if you had bought the stock. This is a simple example. But it’s the simplicity that proves my point. Options allow you to reduce your risk on a stock trade, while allowing you to profit just as much. But that benefit disappears if you overleverage the trade and take on a larger position with options than you’d otherwise take with 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. That’s the biggest, and stupidest, mistake most option traders make. Instead of replacing a 100-share purchase with one call option, they take the entire amount they would’ve allocated to the stock and buy a much larger position with options. In other words, instead of buying one $400 call option to reduce the risk of a $10,000 stock trade, a foolish trader will take the entire $10,000 and buy 25 call options. What would have been a 100-share purchase has turned into control of 2,500 shares. Instead of using options to reduce risk, this trader has increased their risk by 25 times. Losing 100% on an overleveraged trade would be a disaster. And it’s why so many folks think options trading is dangerous – because they’re doing stupid things. [Disturbing In-Store Footage Exposes $269 Trillion Financial Crisis]( Options trading isn’t dangerous if you use options the way they were originally intended – as a way to reduce risk. Remember, limit your options exposure to control just the number of shares you’d 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’ve have lost on the stock. Best regards and good trading, [signature] Jeff Clark Reader Mailbag Why did you start trading options? Did you use it to reduce risk? Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com. In Case You Missed It… [Oil Companies Abandoning Their Oil Fields…]( Stanford economists are predicting [what will happen next]( will shake the markets to their core. [Click here to learn more.]( [image]( Get Instant Access Click to read these free reports and automatically sign up for daily research. [An Insider’s Guide to Making a Fortune from Small Tech Stocks]( [How to Earn Free Bitcoin]( [The Ultimate Guide to Taking Back Your Privacy]( [Jeff Clark's Market Minute]( Jeff Clark Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.jeffclarktrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Jeff Clark Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-800-752-0820, Mon–Fri, 9am–7pm ET, or email us [here](mailto:contactus@jeffclarktrader.com). © 2022 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. [Privacy Policy]( | [Terms of Use](