Options trading has taken the world by storm, you can find plenty of people online selling options courses, people promoting their groups where they claim to send all their trades, and the countless amounts of people flexing their profits online. It is catching they eye of a lot of young people that wants to be involved in the stock market, and even older people who work a 9-5 looking to make extra money on the side. Most people don’t even know what options trading is because it was never really popular until recently. During 2020 a spike In options trading appeared as many people needed money while the economy was shaken up by a global pandemic. As the market had a record fall to put us into a bear market in march of 2020 people found that they can make money off the market going down instead of just when the market goes up. This attracted a lot of people into this space, I mean who would turn down the opportunity to be able to make money no matter what direction the market goes in. Also when the movement of “WallStreetBets” came it encouraged millions of retail investors to buy option contracts on $GME and $AMC which made some people lots of money and others….. lost unimaginable amounts. Either way it introduced a whole generation of upcoming traders to forget the traditional way of “trading” and go all in on option trading.
What is options trading ?
Option trading is not your traditional way of trading, the traditional way is trading shares based on the price of the stock” basically buy as low as you can and sell higher. Options isn’t shares it’s contacts that give the buyer the right to sell or buy a security at a predetermined price. In the simplest terms it’s predicting where the price of the stock is going; whether it’s up or down. By the contracts being so volatile they give a opportunity to make way more money than trading standard shares, the contract on stock like AAPL are usually around 70-90 cents and people sell them at over 20% or more than that, and everything is multiplied by 100. So If you get a contract at 0.80 it will cost you $80 per contract, so if you were to buy 10 contacts it would cost you $800 total. Let’s say the value of the contract goes from $0.80 to $1.00, then the price of each contracts goes up from $80 to $100 which give you a $20 gain on each contract totaling in $200 profit. This is a move that can happen within second which is why option trading is so risky and volatile.
Crazy year for option trading
Options traded on exchanges worldwide reached a record level of 46.77 billion contracts in 2020, up 35.6% from 2019. In 2021 a record 39 million option contracts were traded every single day, which is an increase from 2020. Meaning that most of the people that started option trading in 2020 are still going and new people are still coming at a high rate. 2021 made the their year in a row where there has been an increase in trading volume. Some option contracts are now more expensive than the price of its actual stock ! Stock such as AAPL, NVDA, TSLA, AMZN, and META are the most traded stock options daily, these stocks have high daily volume which makes them the perfect stocks for option trading. There are concerns that this will cause higher daily volatility in the market and make the market riskier but people should be able to adjust to that as the world is moving at a faster pace than ever before.
Do you think option trading is the future of trading or is the already the present ? Let us know in the comments below !
For a full guide on option trading and how you can get started making money daily click here for the option trading beginners guide !