Can options trading turn you into a millionaire?
This is one of the questions I constantly hear from people who trade options and in my opinion it is not easy to answer. Of course, options trading can create millionaires, and many, including me, have made more than a million options trading. However, can trading options turn you into a millionaire?
In a way, asking this question is just as good as asking questions like:
Can stock trading turn you into a millionaire?
Can a futures trade turn you into a millionaire?
Can Forex trading turn you into a millionaire?
Can burgers turn you into a millionaire?
Can collecting coins turn you into a millionaire?
The answer to all these questions is resolute, YES.
The problem is can YOU become a millionaire by doing those things that OTHER people have made millionaires?
First of all, let’s determine the theoretical possibility of earning millions through options trading. Suppose you have $ 5,000 to start trading options and earn an average of 50% per trade and stack your earnings. Here is the status of your account after numerous stores:
After the first trade – 7500 USD
Second – $ 11,250
Third – $ 16,875
Fourth – $ 25,312.5
Fifth – $ 37,968.75
Eighth – $ 128,144.5
Fourteenth – $ 1,459,646
As you can see, it only takes 14 trades with 50% profit per trade, which is not much in options trading, to increase $ 5,000 to a million. If you only do one of these jobs a month, you only need a little over a year to become a millionaire. As such, becoming a millionaire in the options trade is obviously not out of the realm of opportunity and is obviously very quick if you do it right.
This leads us to the next question, can you achieve a series of 14 consecutive wins at 50% per win? There is obviously no easy answer to this either. I’ve heard of extremely happy people who have already done this, but it’s obviously not something that applies to everyone.
Yes, in my 15 years of options trading, I have to say that I have never seen anyone achieve a string of 14 wins in a year or two without losing no matter what options strategy they use. The good news is that you don’t have to earn 50% on every win nor do you need a series of 14 wins to earn a million in options trading as long as you follow a reasonable trading methodology and have a lot of patience.
Making a million from options trading does not mean losing. In fact, it is about achieving more victories than defeats. As long as you have the means to consistently achieve more wins than defeats, you can earn a million in anything as long as you have the patience to stick to the game. Yes, it is the same logic in any form of trading.
If it’s the same in any form of trading, then why trade options?
The beauty of options trading is that it actually helps you achieve more wins than losses in two unique ways; Convexity and versatility.
Convexity means being able to make more money than you could potentially lose. You can potentially lose as much money as you can in futures trading or stock trading. When a stock rises by $ 10, you make a profit of $ 10, and if the stock falls by $ 10, you suffer a loss of $ 10. There is no convexity. When you buy options, they will rise in value as long as stocks go in the right direction (up for call options and down for way options), but if stocks go the other way, you will only lose as much as is used to buy options, nothing more! For example, if you bought one call options contract for a stock for $ 150 and the stock rose for $ 10, the call options would be worth $ 1,000, but if the stock fell for $ 10, you would only lose those $ 150 you used . That is convexity. As long as you use only the money you can afford to lose or the maximum amount you are willing to lose in any single trade according to the purchase options, you will always have the advantage of convexity on your side.
Versatility lies in a wide range of strategy options that can be put together. Many option options allow you to make money not only when the underlying stocks are moving in one direction, but in multiple directions! Yes, in futures or stock trading you only earn when stocks rise or fall (when you have no stocks or futures). However, in options trading there are option strategies that allow you to make money when the stock rises OR falls in both directions and option strategies that even allow you to profit from all 3 directions! Yes, the possibility of earning in more than one direction greatly increases your chance of winning and greatly increases the chance of constantly achieving more wins than defeats!
So, can you become a multimillion-dollar trading option? Yes you can. In fact, from the above-mentioned properties of convexity and versatility, options trading can actually make it easier for you to become a millionaire compared to stock or futures trading. As such, there is a possibility and chances are in your favor. The final question to be answered is do YOU have what it takes to become a millionaire through options trading?