All You Need To Know About Options

“Albert made $25,000 in five days!”

“Lim grossed $45,000 in ten days!”

“Mark made $78,000 in two weeks!”

The seminar adverts in the newspapers practically scream at you.

And I have to admit that the numbers can light up a lot of eyes. Some will no doubt ring to find out more. Some will no doubt register themselves for these seminars in the hope that they too can make this kind of money.

But what if I told you that the subject was options?

Now a slightly different picture emerges.

Firstly, I must admit that options are not illegal or immoral. It is a perfectly legitimate business with billions of dollars in trade.

However, this is the reality. Both futures and options deal in short-term trading. In other words, you are betting money on short-term price fluctuation. And folks, this is another reality – no one can consistently tell where the price of anything will go in the short-term. While we all can be right every now and then, to do it consistently is impossible. And to my knowledge, the ability to predict the direction of short-term price fluctuation consistently is not yet a skill possess by any living or dead person!

Worse, the price of the commodity futures is controlled by giant companies with thousands of very intelligent people on their payroll and billion of dollars at their disposal. What chance does an individual investor has against these giants? Not even slim and none. The answer is none and none!

Now of course, some people will jump and point out, “Azizi, that’s your personal opinion.”

Of course, that is my personal opinion. But that is also my professional view as a Chartered Financial Consultant. It is my professional view that futures and options are for people who do not want to get rich slow; instead they are for people who want to be poor as quickly as possible!

Incidentally, it is also the personal opinion of two other individuals – Warren Buffett (the founder of Berkshire Hathaway and also one of the richest men in the world) and Peter Lynch, the legendary manager of the Fidelity Magellan Fund. Now if two of the most celebrated names in finance think stock futures and options ought to be outlawed (!), perhaps the rest of us should take heed.

Further, reports from New York and Chicago, the twin capitals of futures and options, suggest that between 80 and 95 percent of amateur ‘investors’ lose money. That’s just about all amateurs! And folks, if you have a day job and dabble in options once in a while, you are an amateur player!

And who are you up against? Only giant companies with thousands of very intelligent people on their payroll and billion of dollars at their disposal, that’s who. Can you beat them? Perhaps once in a hundred years.

But can you make money from options? Yes, of course. Once in a blue moon.

Can you make big money from options? Yes, of course. Once in a blue, blue, blue, blue moon.

Can you lose money dealing in options? Yes, happens every day!

Can you lose lots and lots of money dealing in options? Yes, happens every day.

Let me repeat the above questions with a minor addition.

Can you make money from options/gambling at the casino? Yes, of course. Once in a blue moon.

Can you make big money from options/gambling at the casino? Yes, of course. Once in a blue, blue, blue, blue moon.

Can you lose money in options/gambling at the casino? Yes, happens every day!

Can you lose lots and lots money in options/gambling at the casino? Yes, unfortunately again, it happens every day!

Azizi Ali is Malaysia’s premier writer, speaker and coach on money matters. He is a Chartered Financial Consultant (ChFC) and holds an MBA from University of Bath, UK.

Log on to http://www.beahappymillionaire.com to find out more about Azizi and how he can help you lead happier prosperous lives.