Can You Make Money With Options?

In a forum I frequent, I recently came across this innocent sounding question: "Can anyone make money consistently when trading options?"

I don't know if the poster was thinking about learning to trade options and wanted an opinion as to his prospects, or whether he's been unsuccessful and wants to know if he is in the minority.

What I dislike about this type of question is that it serves no purpose.  That's equivalent to asking: "Is eating food good for you?"

The answer is yes, most of the time.  You need it to survive.  If someone eats only at McDonald's, that's certainly bad.  But, if the alternative is to eat nothing at all, then McDonald's becomes  healthy in comparison.

It's not the 'trading of options' that turns an investor into an investing wizard.  Options are a tool.  Tools are instruments that provide help in the completion of a task.

Options provide investors with investing alternatives not otherwise available.  The investor can write covered calls in an attempt to collect extra dividends.  An investor can buy puts or collars to protect the value of his/her holdings.  And investor can adopt conservative strategies with limited gains and/or limited losses and there's always the opportunity for gambling – something I believe is best avoided.

It's not necessary to trade stocks, because options allow all stock market investing methods without ever trading a single share. 

Don't forget, an option's primary purpose (at least in my opinion) – is to allow hedging, or risk reduction.

It's not an option that makes money, it's the investor and his/her decisions, strategy selection, stock selection, and risk management technique.

Yes you can make money with options.  But no one is going to hand it to you.  As with anything else in life, it takes some effort to learn to invest wisely with options.  If you are diligent and careful with risk, you can make money with options.


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