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7 Reasons You Will Lose Money Buying Options

Winning at anything is hardly ever a straight line to success. There are always traps and pitfalls that you'll face along the way. It's how you react to these tough moments, that determines how successful you'll be. That said, I think it's incredibly valuable to know how and why you will lose at buying options so you are better prepared ... to Win!

 1.  You can’t accept more losing than winning.

You are buying options. This means that you will likely lose more often than you win. That stinks, right?

Well, here’s the kicker.

When you win, you are expected to win a lot more than when you lose. 

Now, we know the maximum we could lose on each trade. But, there are no maximum gains. The upside is unlimited! That’s the beauty of options. This is why the Top 1% flock to them.

So, here’s my best advice… 

Don’t dwell on any particular losing trade. 

This is a probability game and losing trades play a starring role.
If you can’t handle losing on a trade, well then, this is the wrong game for you.

 2.  You have complete FOMO.

FOMO – The Fear OMissing Out.

You get the Options Price. You are ready to buy. The Option is trading $0.15 higher than my stated price. Do you buy? Wait?

Now, it’s $0.30 higher. $0.50!
It’s about to flyyyy away.
This exact scenario will happen at some point. 

And if you’re human, you will feel FOMO. Try to avoid it. 

A big part about playing options is patience. Chasing price will have you running around like a chicken with its head chopped off. 

Relax. Stay focused.

In Winning Picks–Trading Ideas Questions–Top 4 Questions, I walk through how to think about your decisions. 

 3.  You think that you’re playing “Where is the Market Going?”

The most common email I get is: “What do you think about [Enter Stock Symbol] now after this move?”

When you hear yourself asking that question… STOP!

Remember, two things:

  • I will tell you that I don’t know.
  • You are playing the wrong game.

You are playing the game: “Where is the Market Going?”

Winning Picks is playing a game that I call, “To Catch a Shark,” which probably should be called “Finding Great Risk-Reward.”

We are using the Unusual Options Activity to lead us to the “Masters of Risk-Reward,” the Top 1% or “The Sharks.”

But, that’s not enough.

My process, the one I teach in 3 Steps to Profit, then filters, analyzes, and chooses the best one I can find.

We are playing this process.

We're also using a Trading Plan to extract profits and prevent disaster. This leads us to number 4.

 4.  You bypass Stop-Losses.

If you’re having trouble here, listen closely...
You could benefit from some coaching.

An “Achilles heel” is a weakness in spite of overall strength, which can lead to downfall. The “Stop-Loss” is the Achilles heel for most traders.

There are many reasons why people blow past their stops. Most are justifications they make to themselves in order stay in the trade.

I will tell you this…
The problem is all in your mind.

While Trading Ideas and the Plan is important, the right state of mind is very important. Make no mistake, trading is a mental game.

Most people think coaches need to be successful Billionaire traders.
Ever see the show “Billions”? Who’s the coach?

Wendy Rhoades.
Not the main actor, Bobby “Axe” Axelrod.
Wendy is Bobby Axelrod’s sidekick, the house psychiatrist, who barely knows how to buy and sell stock.

Trading Coaches don’t need to be Billionaire traders.

They need to know how to connect the dots in your head to allow the mind to function in the way it needs to function.

A Stop-loss is an easy concept.
Now you know why it’s so hard.

 5.  You don’t take money off the table near 100%.

There it is, your first winner!
Your option is up 105%.
And it only took 2 days!

Instead of thinking about what’s important, like selling 1/3 of your trade, you start feeling the breeze, tasting the champagne, and shuffling the sand underneath your toes.

The thinking of a better life creeps in.
"What could I do with $____ in my account this month?"

Vacation in the Caribbean? New Car?
Just 5 of these and it’s a down payment on that House?

STOP!
Focus.

We are not trying to get rich on one trade. We are playing a probability game that will win AND lose.

Your job is to start peeling off the trade as the profits comes. And you must do it according to a plan.

A good plan starts with an exit at 100%.

 6.  You fall in love with “the story.”

You read the trade.
You like it.
The “story” sounds logical.

You can see the Unusual Options Volume that has traded. The chart looks amazing. “This is the one! O-M-G, I see it. Of course, that’s what will happen.”

Here’s my best advice for short-term investing …

Love your partner and kids.
Love your friends and family.
Love your dog.
Don’t fall in love with a stock.
And certainly, don’t fall in love with an option.

The option price determines if we are “right” or “wrong.” Not the news, not anything else.

While the “story” helps us connect the dots, it’s the options price that makes us act.

 7.  You are too short-sighted.

Many people are hyper-focused on the “next big trade.”

Options are a mathematical probability game that is not won on any 1 trade.

Now, you could make a lot of money on any one trade. But if you want long-term staying power, you have to focus on the process and the long-term plan.

This Options Game that I designed is a probability game best played over a longer period of time. We need enough trades to allow the process to work and to allow my Edge to shine. What is my Edge?

Experience.

I advised, traded against, and traded with the Top 1% of investors in the world.

My Edge is derived from those years of experience watching them trade and knowing what to look for. 

It’s the nuances that most people don’t teach and that I offer you in each written trade idea.

So, remember...

You are playing a process – My Process - and not focusing on any individual trade. Sure, the trades will each win or lose, but it will do so within a larger pool of trades.

If you don’t give Winning Picks a real shot for a couple of months, you are selling yourself short.

One Last Question

There you have it.

These are the 7 reasons why you will lose buying options.

Now… Are you ready to Win?!

This is how an OptionsGeek Member Tripled his account in a few months with Winning Picks! See the Results and his actual trades at the end of th evideo. 

Teacher

Felix Frey

Felix frey about author

As a Wall Street Veteran, Options Expert, and founder of OptionsGeek, Felix has found a way to simplify options. He's on a mission to close the knowledge gap between the Top 1% and everyone else.

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