When it comes to Options Trading the internet is full of myths and misconceptions that can mislead traders who are interested in learning about this asset class. Here are some of the most common ones:
- “Options Are Too Risky” – While options can be risky, they are not inherently more dangerous than other financial instruments. When used correctly, they can actually reduce risk through strategies like hedging or simply due to the nature of risk defined strategies.
- “Options Are Only for Professional Traders” – This was once true, but advancements in technology and education have made options trading accessible to individual traders. With some effort anyone interested in trading can learn to trade options.
- “You Need a Large Amount of Capital to Trade Options” – Options offer leverage, allowing traders to control large positions with relatively small amounts of capital. There are many strategies that allow options to be traded on smaller accounts. By using vertical spreads you can trade even the most expensive stocks for less than $500-$1000.
- “Options Are Too Complex for the Average Investor” – Some strategies are complex, but many basic ones—like buying calls or puts—are straightforward. Vertical spreads are a very flexible way of trading options while controlling risk and can be easily learned.
- “You Can Predict Market Movements with Options” – No one can predict the market with certainty. Options can be used for speculation, but they are also valuable for hedging and managing risk.
- “90% of Options Expire Worthless” – This is a widely repeated myth. According to the Chicago Board Options Exchange (CBOE), only about 30% of options expire worthless, while the rest are exercised or closed before expiration.
- “The Only Way to Trade Options Is Buying Calls or Puts” – Many traders think options are just directional bets, but strategies like credit spreads, iron condors, and covered calls allow traders to profit in different market conditions.
- “Options Are Only for Speculation” – Options can be used for hedging, income generation, and portfolio protection, not just speculation.
- “It’s Easy to Make Money with Options” – Some trading educators push the idea that options are a quick path to wealth, but successful trading requires skill, discipline, and risk management.
- “Zero-DTE Options Are a New Phenomenon” – Short-dated options have existed for decades. The rise of daily expirations has simply made them more popular.
These myths can lead traders astray, but understanding the realities of options trading helps build a solid foundation.
Have you encountered any misleading claims in your own trading journey?
