Complaints About Fees Abound: Compared to What? Options Traders Take Note.Complaints About Fees Abound: Compared to What? Options Traders Take Note.

For those with a need for money management services, a good money manager who balances returns, with income and risk, can be priced appropriately. Typically, these managers will charge between one and one and a half percent of assets under management for their services.  For those who are young and are looking to grow a portfolio, there are ways to build a diversified allocation with significantly lower expenses. Often times, people have disdain for the costs of a money manager while at the same time trading options for their own account. Numerous strategies are popular, including the covered call, which, for those who lack a full understanding of options trading, is the same as selling a synthetic put or a naked put. The point, however, is that for those trading options, but feeling hostile towards money management fees, they should consider the liquidity of the options markets they are trading.

In finance, there are expenses everywhere. For popular hedge funds, it is typically a 2% fee for the money invested in the fund plus 20% of any profits. For most hedge funds, 2016 has been a disaster. This year the number of profitable funds has dwindled tremendously and the investors are left holding significant losses. While the S&P has provided a tumultuous ride so far this year, fortunately most of its losses have been recaptured. For a multitude of investors, this is not the case, particularly those who are aggressive and have invested in a variety of hedge funds.

When trading options contracts, there is significant leverage and the ability to manage risk which is only available to those who trade derivatives. For those that understand Liquidity, Implied and Historical Volatility, the Skew and numerous Options Trading Strategies, the ability to generate creative strategies which can increase returns is prevalent. Contact us to enhance your understanding of these issues. Our Private Webinar Training Sessions, for a fee of $75/hour, will enhance your option trading methodology.
  
The Chart below shows the prices of a variety of options contracts a few minutes before the close on Wednesday. When discussing fees while trading options, one must consider the differential between the bid/ask spread as a cost of doing business. In most cases the differential of the options shown is significantly greater than one to one and a half percent. In addition, these are not percentages on an annual basis. While I am a strong proponent of options trading under the right circumstances, I am always cognizant of the expenses that are involved. In many cases, the costs are surprising. The options described below are extremely liquid (some with a penny wide spread); however, when considered as a portion of their asset value, they may be prohibitively expensive to trade.

OPTIONS TRADING INVOLVES SIGNIFICANT RISK AND IS NOT SUITABLE FOR EVERY INVESTOR. THE INFORMATION IS OBTAINED FROM SOURCES BELIEVED TO BE RELIABLE, BUT IS IN NO WAY GUARANTEED. PAST RESULTS ARE NOT INDICATIVE OF FUTURE RESULTS.

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