Options trading

Money
1

This is not about Binary Options!

Although this type of investment isn’t for the faint hearted, nevertheless people who want to learn, use online tools, need an appropriate online broker, etc, need high quality products and service.

The ASX organises the running of two investment Games, one for ASX share trading ‘running now in April/May’ and another for Options Trading in July. The idea behind these is excellent, ie, learning first hand to use such tools, with risk free $50,000 paper trading. However, these Games are outsourced to private companies working in these areas. So, they have a vested interest in players. I’m not sure of the veracity and quality of these companies or their education, support and tools.

But, on the other hand I’m not sure if they actually have any viable alternatives or competition. The Options game uses a tool that, post the game you can use for 1 month free trial, which they will extend a bit, but its use for a live account starts at $200/month. That seems like a very expensive piece of software. Software which generates direct income from each trade fee for the company.

Further I’m not convinced of ASX’s role in this, or their support and guidance.

My experience over the last few months, is the Jargon is horrendous. When listening to online briefing from such companies, it is like being in a foreign country trying to understand two locals who know each other very well having a highly emotional conversation, while simultaneously doing a conjuring trick! Expecting them to explain any aspect when none have a Training background is fraught!

However, the leverage Option Trading, with its high risk, can provide useful investment as part of a portfolio.

2

For options trading to generate a real profit for one person, does another need to lose real money?

It sounds very similar to playing lotto. For one to win big many need to lose more in real money. The only true winners are those running and taking the profits from the game.

Isn’t it also true of options trading?

At $200 pm that’s also a lot of chances in the lotto. Better perhaps to use it to pay off the home mortgage, credit card or put solar PV on the roof. :slightly_smiling_face:

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4

The adage is to never invest in something you don’t understand.

Having said that, options buying and selling is a two party game. Either the buyer wins, or the seller wins. The buyer of an option is limited in potential loss to the premium paid, whereas the seller’s potential loss could be unlimited.

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5

I think the discussion is about risk and reward and the opinion offered by @mark_m discussed it in a way that allowed a non options investor to compare it to something most understand. From what I understand Options like Shares are risk or a gamble as well.

I am unsure what you mean by the quoted paragraph that follows

Do you mean for those who want to learn they need to “use online tools, need an appropriate online broker, etc, need high quality products and service”?

What do you mean by “high quality products and service”? Is that the options you choose?

I think discussing Options Trading is worthwhile, there will be discussion that does enter into what is worthwhile or ways that may provide outcomes suitable to others. Thank you for raising the topic.

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6

The discussion I initiated isn’t about discussing the pros and cons of Options trading. This is only about the products and services that enable any consumer to undertake Option Trading Online.

Choice does reviews of many products and services, many are your typical physical objects like white goods; but increasingly their reviews are about services and the software they use, eg, Wireless Mesh Networks, Insurance,Travel, Superannuation, Anti Virus, etc. These have companies sourcing, that from the consumer perspective have pros and cons, as companies themselves, but most importantly the quality of those products and services. Options Trading has the same need, possibly more so, because the services and products are even more complex and obscure.

In a review of, say washing machines, we expect Choice to do a thorough review of what such a product does, looking for shonky products versus the better products, and their Strength and Weaknesses.

It would be useful to get opinions about the type of things such a review might cover, for this particular method of unearned income.

So this is not a philosophical discussion about risk and reward aspects of various investment strategies. Certainly not about recommended Shares or Option Contracts to buy/sell.

Hence, implicit in what I have outlined of the services such companies offer, are there impact on consumers of their products, eg, vested interest, the quality of the education, the quality of the software tools, but possibly also potentially very limited competition, that with all aspects of personal finance are the companies what they seem.

My objective is not to sling mud at Options Trading, because some feel it is too risky. But mud slinging is great way to stop such a service and product review from being considered by Choice. Rather it is to enable consumers who are considering this form of unearned income to get the best information, ie, Choice review, about the alternative Options Trading product and service available to Australians.

7

My bold.
A simple question. Is options trading suitable for ‘any consumer’?

I understand the starting point asking about reviewing the commercially available products. I’ve invested in shares over a long time. It would seem a very big ask for Choice to undertake an assessment of the available products. Where would Choice have the relevant independent expertise and experience in Options Trading? The best experts are not likely to assist for free, or may have vested interests.

It might be best to look elsewhere to the financial periodicals for reviews and guides?

As to whether the topic should neglect to advise of the risks involved in Options Trading? Most consumers are not ‘sophisticated investors’. It would seem very inappropriate to introduce the topic without firstly a clear caution. Secondly to indicate that even with the best product recommendation, there can be no assurance of success.

Note:
I can’t get Choice inspired to review Waste Water Treatment systems, or rain/rural water home filtration and treatment. Something that 1 in 10 Australians need. As great an opportunity learning more about options trading might be, respectfully I know where I’d prefer to see Choice spend its funds.

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8

While CHOICE may do a review if they do it will probably outsource this to a service that specialises in such financial dissection or ask a fellow institution that specialises in financial products to produce a review. So I don’t think this will be a CHOICE review or even if they do it may end up being a joint project.

Your post doesn’t read like a request but it reads like it is your experience of Options Trading. You raised problems, you raised financial investment, you raised ASX governance but in your first post you didn’t request a review of the Option Trading system. Your final line in fact was a recommendation of the products “However, the leverage Option Trading, with its high risk, can provide useful investment as part of a portfolio”. Nor do I think any mud slinging has occurred by any poster here. Certainly they responded to your take/opinion on options as is their right to do so as long as they are respectful of others without personal attacks.

In light of what you have now clarified I have moved the topic from General to the Money category and added a tag about requesting a test. I will also add some CHOICE staff so they are particularly aware of your request. Thank you for the request.

For attention @BrendanMays @jhook @jzarate

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11

This is possibly why it may not be reviewed by Choice. Options trading is a specialist field, no different to CFDs, shares, artworks, coins etc.

If one plans to delve into these or other specialist investments, they possibly should, like you have hinted above, obtain some relevant information from attending training sessions or asking financial experts in the field. Then one can determine if the risks fit their own profile and whether they wish to partake in option trading.

Being an avid and interested investor myself, I have explored options and have chosen not to use this as an investment tool for various reasons (I however have held options issued by a company for a short period). I know of a couple of people that do trade in options, and I am sure that they (and myself) would not rely on the views or advice of Choice, an organisation not set up to provide such advice or reviews.

Also one has to be careful in relation to the scope of this community. The community is not here to provide or request financial advice, and one should seek such advice from their own trusted and respected expects in the field as everyone’s financial circumstances are different.

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