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Why Traders Get Attracted To Options Buying

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Here is one email I got from a novice trader:

Mr. Dilip, I am totally novice into options and while talking to good reputed stock brokers, assessing my risk capacity and capital investment (max 30k), they have informed me to do in derivatives (options) trading, where you pay minimum margin and also will get time to put in your stop-loss gap and other triggers, where you can earn minimum profit of Rs.5,000/- pm or more.

Next, in the cash or equity segment, you have to pay entire margin money and the sale value after brokerage and other taxes parentage will be far less than options trading.

But to me all these terms are very new and not able to practically do the things.

So, persons like me who are very conservative, middle aged and income generation is more priority, what will be your suggestions.

Read the first paragraph carefully. Traditional brokers who have a target to achieve making money from brokerages will tell anything to their clients so that they generate a brokerage.

One of the best ways to make money from brokerage is to sell a dream like in options you can invest 5k and make 10k.

Well technically its true but not many are able to live that kind of dream every day.

Invest 5 and make 10 is 100% return. A new comer will dream something else when he listens to this. He will dream like – invest 10 lakhs and make 20 lakhs (this may be his savings), or invest 20 make 40, now invest that 40 and make 80…the dream goes on and on.

What happens next? The poor trader immediately agrees to their brokers advice and ask them to buy the trade they recommend. Brokerage made. Target Next customer.

Why brokers never suggest Futures? Because 50% of their clients do not have the margin required to trade Futures. What is the point in selling a dream to someone who does not have the cash to buy that dream?

Note: Future trading requires more money as margin than Options buy trading. Option selling requires same margin as Future buy/sell, so options selling is never sold to the clients.

Money getting double is a great dream to sell and it will continue.

Now the real answer:

1. Stock trading is a business and risk is involved.

2. Option buy and sell can double your money but the chances are less than 1%, as either the trader exists at 2-5% profit or takes a stop loss at 50% or let the option expire worthless (all money gone down the drain).

3. Option buyers must always hedge their positions but that still does not guarantee profits. Naked option buying a very risky. Unfortunately this is the most sought after trade by option traders because option buying is very cheap and comes with limited loss.

4. Yes you get more leverage with less money in options, but you should know that it has an expiry time and you should be correct in your trade before the expiry comes.

5. See point no 1. Stock trading is a business but what business you can start with 30K? Even if you make a return of 10% on 30k that is just 3000. What difference does that make?

Change your mindset of investing less and making more. Options are a great tool if you learn to trade them properly.


Fill this Form to Get 5 Day Free Course on Options & Download Option Greeks PDF File - Download Link Will Be Sent To Your Email

What you should do now

1. If you have still not subscribed for my free 5 days course you can do by filling the form above. You will learn a lot about option trading.

2. If you are a new option trader, not much experienced and are making losses you can do my paid course. I recommend Nifty Conservative Option Course for beginners because it is easy to understand and easy to trade. Even a 18 year old young trader or a housewife can learn it and start trading from next day. It will help you to earn consistent monthly income without any software or speculation or stress or big risk. You will learn proper hedging strategies that works in any market condition.

3. If you are banknifty weekly options trader you can do my Bank Nifty Weekly Options & Futures Strategy Course. You will learn future and option hedging strategies that works in volatile market condition.

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Here is complete process of my course

1. Once you pay I will send you the course materials for studying to your email.
2. You read and ask me questions via phone/whatsapp/email to clear doubts.
3. Then you start paper trading and still can ask me questions.
4. After about one month you can start trading.
5. Since doubts can come anytime the support will be there for one year.

Within one month you can start trading on your own. No need to depend on anyone once you are on your own.

If you have any question you can contact me.

You can read about me here and my trading mistakes here.

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Dilip Shaw, Founder

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INCOME DISCLAIMER: Any references in this site of income made by the traders are given to me by them either through Email or WhatsApp as a Thank You message. However every trade depends on the trader and his level of risk taking capability, knowledge and experience. Moreover stock market investments and trading are subject to market risks. Therefore there is no guarantee that everyone will achieve the same or similar results. My aim is to make you a better & disciplined trader with the stock trading and investing education and strategies you get from this website. Please note that I DO NOT give tips or advisory services by SMS, Email, or WhatsApp or any other form of social media. I strictly adhere to laws of my country. I only offer education on finance, investments on stock markets in the best possible way as much as I can through this website. Still, you must consult an authorized advisor or do thorough research before investing in any stock or derivative before trading any strategy given in this website. I am not responsible for any investment decision you take after reading any article given in this website. Knowledge is the only way to get success in stock markets. I try my best to give stock market investing and trading knowledge through the articles posted in this website. Thanks for visiting my website.

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About the author: I started trading stock markets since 2007. However my first 3 years were losses. Then I dedicated almost 1 year on studying, researching, paper trading options and learned a lot in that time. Since 2011 I am trading Nifty options profitably. Call me if you need any help trading options on 9051143004.

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