No, You Aren’t Going to Get Rich by Options Trading

Isn't that all the more reason they should stop after they experience the emotions of their first loss?

If all they experienced were negative emotions + losses, they'd stop sooner/retail options trading wouldn't be "such an epidemic".

Therefore, something I feel the article author slightly missed discussing, they win sometimes.

That's the data I'm interested in.

How often does a retail investor, irregardless of predatory Wall Street + high commissions + fees + whatever, come out ahead on an options trade? Once a week? Once a month? Once a year?

If they win 50% of the time and lose 50% of the time, maybe it's not that evil?

I haven't found any. And every time an option trader tells me about their "low risk" strategy I see a disaster waiting to happen. The "low risk strategies" of option trading are usually strategies where you make a bet that will give you a low income if things go about the way they have been going about for the past couple of years, and massive disastrous losses if a very unlikely seeming market event happens.

The problem is that the market loves serving up unlikely and impossible seeming events. So really what you think is a low risk income strategy is actually you providing insurance to someone against an unlikely but an entirely possible event without you pricing in the risk of the event in your insurance fees. Because you have managed to convince yourself the event will not happen.

For example, a couple of years ago people were so used to low interest rates that they kind of started believing that interest rates would be low forever. And they came up with all kinds of options and derivative strategies which seemed to generate free money but in reality were bets that interest rates would stay low, or would not breach a certain impossibly high seeming level. Well interest rates went up and in some places (for example, the UK) they hit levels many people thought impossible. And boy were there blow - ups.

More specifically, to your point, "the wheel" strategy is basically a bet against volatility. It will work if the volatility of the primary market is lower than the implied volatility priced by the options market. If not, it will not work and you will lose money. Oh, and if there is one high volatility event, bad enough to wipe you out ... well then you are wiped out. Even if the average volatility was in your favor. So, no, the wheel is not a safe strategy.

If you think you can predict volatility go ahead. But some of the highest paid traders try to do that and get it wrong, so, good luck. But do not fool yourself that you are being safe.

You can essentially guarantee yourself an income. The risk comes from anytime you're holding stock and the stock value decreases, but you can sell calls on that and earn an income on that until a company goes out of business. This type of wheel strategy is inherently less risky than merely buying stock. There's obviously a lot of nuance to even simple options trading and I don't want to write out 100 paragraphs for some casual comment.

Why with a starting balance of $10,000 that would be (at the very lowest end of that range) over $1.25 billion dollars after 20 years.

If you don’t mind me asking, what was the offer that tempted you to give that up?