Get out there. For a miniscule wager, riches are a possibility. It’s a dream. Why not dream for a while. Look at it as a small investment of risk capital. That’s the thought process of many Mega Millions players. With millions of options contracts trading per day on stocks, ETFs, commodities and other futures contracts, the mentality is the same. For a small investment you might make really good returns on your money. When I traded commodities in the options trading pits between the 1980s and up to 2010, it was estimated that 90% of the people that traded commodities lost money. That’s still quite a better than Lottery players. At least commodity trading was a zero sum game. Now it’s time to look at Lotto versus options trading.
1) Mega Millions involves little preparation
2) Mega Millions involves an extremely small investment
3) Mega Millions involves no brokerage account
4) Mega Millions can take several days to know whether you were a winner
Options trading is quite a bit more complicated than playing the Lotto. If you take it seriously, it requires quite a bit of preparation. The Options Guide PDF is a primer about basic knowledge pertaining to options trading. If you’ve mastered the basics such as the trading of simple Call and Put Strategies, then you are well beyond the skill required to pick lottery numbers. The next problem is capital. If you have several thousand dollars of risk capital, hopefully far more than you would put into a lottery “investment”, you can open up a trading account and get started. For lessons on understanding option trading: contact us.
The amazing thing about options is the leverage you can attain. For example, for about $70 you can control $82,000 worth of Google (GOOGL Alphabet A) stock. If Google was to rally a bit more than 16% between now and the expiration of August options you would have the opportunity to participate in being long GOOGL from $82. Of course, you could trade out of the option at any time. While this doesn’t seem too likely, only a few weeks ago traders of LinkedIn turned investments of $100 to $300 into between $5000 and $6000 depending on the strike price they were trading. Their returns may have been even more substantial depending on the strike prices and expiration series they chose.
Unequivocally, the likelihood of making money trading options contracts is substantially higher than buying lottery tickets. It all comes down to investment capital. For those that like the opportunity to make a bundle for nothing, it’s hard to replace the dream that the lottery provides. For those that are willing to take risks for a significantly higher probability of making money, options trading provides excitement, liquid markets with constant valuation and the opportunity to potentially develop a skill that playing the lottery doesn’t’ provide.
Trading is often described as a sport. If you have the skill to trade, you will likely make money in the long run. Half a billion dollars is quite tempting, but I would rather evaluate the odds of making money on an options position. If you happen to read this article and win the half a billion dollar lottery, contact me, because just like a good options trader, you beat the odds.
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.