Options Trading Myths

Myth: Options are too complex and should be avoided.

While options may be complex, they can have benefits for suitable investors. A qualified, experienced Investment Advisor can help suitable investors to take advantage of these benefits while considering their risk profile and objectives.

Myth: Options should only be used for speculation.

While using options to speculate can be a part of an investors overall strategy, they can be risky and complex without proper understanding and education. Tyler advises against using options purely for speculation. Instead, options can also be used to protect gains and act as insurance.

Myth: Options are only a high-risk investment.

While option trading does involve risk, it does not have to be purely speculative and high-risk. Options can be used to provide insurance in a portfolio, offering some of the features of short selling – without the unlimited loss potential. Options should only be considered as part of a holistic investment strategy that considers an investor’s overall goals and risk profile.

Myth: Anyone can trade options.

In order to trade options in Canada, Investment Advisors are required to have specific qualifications. Canadian options-licensed advisors can trade options both in Canada and the US. Based on 2015 TMX estimates, of the 27,000 IIROC advisors in Canada, 20% are options-licensed, and, of those, only 20% (or 4% of all IIROC advisors) are actively engaged in options trading.*

*Source: TMX Montreal Exchange