Why Option Traders Lose Money

After Options You Have No Options In Life.

Today our topic is why option traders lose money in share market. We will not discuss like other articles top 3 reason or 5 reason why Option Buyers and Seller lose money. You know these reasons very well why you lose money in share market.

We already discussed share market is best business in the world not a gambling. Before read this article how much money you have already lose in market write in comment please. Than search on Google how many people making money from option trading and how many people become rich from option trading.

Beginners Psychology

A beginner do option trading because he think in small capital i can take big quantity of shares and make money easily, he wants just double the money in single trade. Beside this he lose all money because he does not know science behind options.

You think by options you become a Crorpati or a billionaire just search on google how many become billionaire by option trading. Dark reality is you are a gambler and you think market is a gambling place. When you lose your money you give advise to others that market is gamble.

Lack of a clear strategy: Options trading requires a well-defined strategy. If options do not have a clear plan, exit strategy or risk management in place, they may make impulsive decisions that lead to losses.

Risk Management : In option trading do you know where is your entry and target. Where is your stoploss, minimum stoploss in option trading is 5 to 10 % of your capital. In option trading you are on a path where you don’t know where is your goal and where you want to go.

Holding options until expiration: If options buyers hold their contracts until expiration and they are out-of-the-money (i.e., the underlying asset’s price has not moved in their favor), the options will expire worthless, resulting in a total loss of the premium paid.

Time decay (Theta): Options contracts have a limited lifespan, which ends on the expiration date. As options approach their expiration date, they lose value due to time decay (theta). The closer an option is to expiration, the faster its time value erodes. If the underlying asset’s price doesn’t move in the desired direction quickly enough, options buyers can suffer losses as the time value diminishes. They wants to take option at cheaper price and think it going to 10x from this price.

Lack of price movement (low volatility): Options provide leverage, which means that a small price movement in the underlying asset can lead to significant gains or losses in the option’s value. If the underlying asset remains relatively stable or experiences minimal price movements, options buyers may incur losses, particularly if they have paid a premium for the options.

Position Sizing-– In options there is a lots of shares in big quantities you can’t change sizing minimum 1 lot have 100,500, 1000, shares in one lot. If premium goes down by 1 or 2 point your money just go minus 2000 point if lot 1 lot contains 1000 share.

Over Trading –– Once a trader take loss he do revenge trading, trader think after a losd he can recover his loss and finally he lose all money by the revenge trading. Loss making traders expended an additional 28% of net trading losses as transaction costs which include brokerage, clearing fee, exchange fee, STT and GST charges.

Emotional trading: When traders make decisions based on emotion rather than logic, they are more likely to make mistakes. This is especially true when the market is volatile.

A study by the Securities and Exchange Board of India (SEBI) found that 89% of individual traders in the equity F&O segment lost money in FY22. The average loss for these traders was Rs. 1.1 lakh. The study also found that 90% of the active traders in the equity F&O segment lost money.

When you open any brokerage application first you see this notification on screen of app, besides this you do options trading why.

Summary -Trading options involves a number of considerations both before and after the trade has been placed. Many of the mistakes mentioned can be accounted for before the trade is opened by utilizing the tools and resources Fidelity offers. The single most important step to trading options is to develop a plan and stick with it! Some of the tools and resources that can help you establish your own plan include the Options Strategy Guide, Key Statistics, Probability Calculator, and the Profit/Loss Calculator. Take advantage of these and other trading tools and resources Fidelity provides to help you avoid these common options trading mistakes in your future trades.

When some one or your friend take some your money you ask from that person when you return my money you check all pros and cons before giving money to that person than what happen to you in market you give all your hard money to someone.

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