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Covered Calls - Trading Options To Lower Your Risk
By Robert Hauver
"Are you, nuts?! You want me to risk part of my savings trading options? This whole covered calls
idea sounds like just another one of those crazy options strategies that sound great, but don't deliver in
the end."
My pal was a normally a mild-mannered sort - very contemplative, always weighing the consequences
rationally before acting. In short, a logical thinker.
Imagine my dismay when that one phrase, "trading options", triggered this unprecedented tirade.
You'd think that I'd insulted his family or maybe something worse.
After a few moments had passed, I realized the reason for my friend's outburst. He, like so many other
investors, had only lost money trading options.
Why? Because he'd never discovered the number one option trading secret: 3 out of 4 options expire
worthless. You read that correctly, when you trade options as a buyer, you have a 25% chance of
making money, and a 75% chance of losing money.
This is why professional traders and investors favor the option strategy of selling options, rather than
buying them, in hopes that the trade will go their way.
"Wait a minute. How can all of those options just expire worthless? I've seen ads for 100's of option
strategies and trading systems on the internet. They can't all be losing money."
I had to smirk. Now I really had him thinking. He knew that I hadn't yet told him the big "secret behind
the secret", but he couldn't quite put his finger on it.