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Options Trading: The World of Risk and Reward

Most people have heard something about options, usually that they are extremely risky and difficult to understand. I dispute both of these points. They can be risky, or they can be very conservative.

I recently was reminded that just telling someone how options (or anything else) works is only one aspect of how we all communicate. It is just as important for financial advisers, writers, and experts to listen to what other people tell them. Recently I asked a new friend about her investing strategies. She said, “I am in the position of not knowing what questions I should be asking.”

This was profound information to me, as well as an important reminder. Like many people, I get so involved in explaining the nuts and bolts of options and how they work, that it makes sense for me to take a step back and evaluate how to communicate effectively. So here is a list I am giving to myself as a reminder, hopefully to make me a better writer and communicator.

1. Listen to other people. What do they need to know and what are they asking?

2. Focus discussions around risk. How much risk can you take, and how has your risk profile changed?

3. Where can people get basic information as a starting point? I think everyone should download a free copy of Characteristics and Risks of Standardized Options (at www.cboe.com). The title is the most complicated part of this prospectus. It does an admirable job of explaining the basics.

4. What can I learn today? I try to remind myself that everyone can learn, no matter how much they already know. The more I study options, the more insight I acquire. This is a complex field but everyone can gain an understanding of it with study.

5. What can I improve? I think my writing is constantly evolving and I try to be my own harshest editor – but there are plenty of editors in the world who try to claim that title for me. But I do want to improve, break my bad writing habits, and simplify my style. I know that once I am content, I will begin to lose the edge I want and need to maintain.

6. What else can I do? I want to keep it fresh and I have written a lot of books, but I want to continue expanding. I’d like to spend more time as a speaker, for example. I’d also like to write more history books in the future – not that I don’t enjoy writing about options, but there is more to life.

In coming blogs, I will talk about some of the great options strategies I have found and tried. I have been trading since the late 70s and believe me, the market today is not the same as it was 30 years ago. If you have questions, let me know. I would enjoy an interactive blogging experience and I did say I want to listen more, didn’t I?