What are the most common myths about options trading?
 
There are several myths out there about options trading, and we take every opportunity to debunk every one of them.
 
Without a doubt, the most common myth about options trading is: "Most people who trade options lose money because 80-90% of all options contracts expire worthless."
 
This statement is completely wrong for a couple of reasons. 
 
First of all, those who proliferate this myth are probably referring to the number of options contracts that are actually exercised. Historically, about 10-15% of options are exercised, 55-60% are closed out prior to expiration, and 30-35% expire worthless. But what's even more important to recognize, is that a contract being closed or expiring worthless offers no indication that an investor has lost money. Closed positions, as well as expired options, may have been part of a profitable strategy involving underlying securities, such as buying protective puts or covered call writing.

Another common myth is: "For every options winner, there's a loser." (a.k.a. zero sum game)

This is not true because different options strategies offer "win-win" situations.

Consider an investor that owns stock and purchases a protective put.  If the stock rises in value, and it is above the strike price of the put option at expiration, then yes, the put would be of little or no value.  However, the stock and option holder would most likely feel that this was money well spent.  They were able to protect their stock investment with the purchase of these puts.  It's similar to buying insurance for your home or car.  Just because you don't use the "insurance" doesn't mean an investor is wasting their money.

An additional myth is: "Options are too risky and should only be used by professional traders."
 
Again, this is simply bunk because some options strategies are even more conservative than buying stock outright because they are used to minimize risk. One reason that this myth might exist is the fact that some brokers and investors could benefit from additional options education. This will give them the knowledge they need to use options as a risk management tool, or as profit potential. Regardless of how an investor uses options, it's crucial that they take the time to learn basic terminology and some fundamental concepts. The good news is that there is a wealth of free education and information about using options as an investment tool. For example, The Options Industry Council (OIC), provides free seminars across the country, a Web site with online classes and information at www.888options.com and they can also speak to a live professional who can address any options question at 1-888-OPTIONS from 7:30 a.m. to 5:00 p.m. every trading day. The best options investor is an educated options investor.