Thnz AW10 , nice answer, yes i wont interview the girls mom n dad or relative!
rightly said by u.
But why do people trade futures when options give much more ease and flexibility with higher returns than futures.
Can u explain this?
Sameer,
I am explaining my reasoning below as I understand it (don't know if that is correct or not.. but atleast it seems logical to me),
Most of the people start with stocks.. where pricing is straight forward, no complexity.
Charts of stock follow Technical analysis very well.
Futures is logical transition from stock. Where pricing is not very complicated. Just need interest rate as input to get cost of carry for future based on spot price.
Charts follow the TA pretty well. Gives leverage what traders need.
Option pricing is lot more complex (believe me, it is not straight forward though u can trade without knowing it..but u can trade more profitably if you know it). It needs different mindset then a regular traders (lot more probabilty and statistics starts coming into option pricing). You are becoming a casino owner or insurance company as real option trader.
There are way too much flexibility which makes decision making difficult.
Hence not it is last choice for many people. And even if they enter here, they just buy call/ buy put option.. like they used to buy stock. In my view, that is one of the most risky option strategy (i.e. just buying option).
Most of the people don't realise the flexbility that options trading provides in managing risk (which is the underlying truth of trading business).
You can use options to hedge, to trade, to speculate, to get regular monthly income, to place holiday trades.. that needs no monitoring cause you can define your exact risks.
So it is individuals choice. Some people are comfortable with complex decision making process, and some like it simple. In my view, it is the fear of choices that options world gives to people, keeps them away.
Happy Trading