Options have a fine characteristic. They allow leveraged trading without the danger of margin calls or an account that is able to go below zero like it is possible with a futures or Forex account.
But there is a drawback. What at first looks like a gain that comes without a price is in reality a fallacy. Options have a duration and that causes price erosion. The option premium constantly shrinks and in the end it arrives at zero. Temporarily it may also show up in negative territory. Option accounts may not fall below zero but they approach the zero faster than any other trading account does on average.
The solution is to concentrate on long-term options. The longer the duration the smaller the loss per day in the premium. Still, there is something else hiding diabolically in the numbers. It is the mathematical effect of concentration of the money on very few who win hugely while many lose. This is like playing the lottery. Most likely it is a time waster and you could have spent your money better. You will simply not be among the winners and so it doesn’t matter for you how much you could have made if you were!
The real solution is the stock market. Stocks are options with an infinite duration, at least theoretically. There is no preprogrammed loss in the premium, because their is no such thing like a stock premium. But the company behind a stock can always reinvent itself or find some new way of doing its business. Of course, some stocks are destined more for explosive moves than others, but principally they have all unlimited potential.
As a conclusion, trading the short term horizon, but being prepared for a longer run, is the way to go. One of the best strategies to enter long running trends is the Triple Trend system. It trades growth stocks for small gains, but is able to rake in the huge outliers. All that without paying a premium that is going to vanish. Stocks also have a better liquidity and smaller slippage than options. Stock markets are more competitive than option markets. Trade options and you are at the mercy of the options market maker.
Finally, traders with technical analysis methods recommend to follow the master for technical trading decisions. In this case that is the underlying stock and not the option itself, because market maker tricks only add additional random gyrations to the option price that distort the TA picture. If options traders are advised to technically or mentally trade the stock, why not trade it in the first place?
