7 Dumb Myths About Options Trading That Are Stopping You From Making Money

You don’t need a Ph.D or 10 years of market experience to see how silly some of these options trading myths are.

Just a little common sense is enough — and yet, these false beliefs are stopping thousands of traders from growing.

Let’s clear the clutter and bust them wide open.

𝙈𝙮𝙩𝙝 #1 – Selling Options is Always Dangerous Due to Unlimited Risk

Reality: Naked option selling can be risky, but smart traders use stop-losses, hedged positions, or spreads to define risk.

For example, you have a bearish view on Nifty and hence decide to sell Nifty 23500 CE.

In this case, unlimited risk starts when Nifty starts to trade above 23500. Buying a little out-of-money option will avoid the unlimited risk.

For example, buying a 23,700 CE converts unlimited risk into a defined-risk bear call spread.

𝙈𝙮𝙩𝙝 #2 – Options Trading is Gambling

Reality: Gambling is guessing. Options trading is about probability, logic, and risk control.

A trader who sells a Nifty straddle with a 2X stop-loss on premiums near expiry based on range-bound market expectations isn't gambling—he’s playing calculated odds.

This approach reflects a strategic mindset where the trader meticulously analyzes market conditions, volatility, and potential price movements.

By selling a straddle, which involves simultaneously writing a call and a put option at the same strike price, the trader is essentially betting that the underlying asset, in this case, the Nifty index, will remain within a certain price range until the options expire.

The decision to implement a 2X stop-loss on the premiums indicates a disciplined risk management strategy.

Thus, rather than engaging in reckless gambling, this trader is engaging in a well-thought-out strategy that balances risk and reward, leveraging their knowledge of market behavior to enhance their chances of success.

𝙈𝙮𝙩𝙝 #3 – You Can’t Make Consistent Income with Options

Reality: Many traders generate monthly income using strategies like covered calls, iron condors, and credit spreads.

It’s not about prediction—it’s about having a repeatable system that works over time.

𝙈𝙮𝙩𝙝 #4 – Options Trading is Only About Predicting Direction

Reality: Options let you earn from time decay, volatility, or even when markets move sideways.

Example: If the Nifty index is trading within the range of 23,200 to 23,500, a short strangle strategy can be particularly advantageous for traders looking to profit in a non-directional market scenario.

"A short strangle involves selling both a call option and a put option at different strike prices but with the same expiration date."

In this case, the trader would sell a call option with a strike price above 23,500 and a put option with a strike price below 23,200.

By implementing this strategy, the trader is essentially betting on the Nifty index remaining within this specified range.

As long as the index does not breach either of the strike prices, the options will expire worthless, allowing the trader to keep the premiums collected from selling the options as profit.

𝙈𝙮𝙩𝙝 #5 – You Need to Watch the Screen All Day

Reality: Many weekly and positional strategies require just 15–30 minutes a day.

Entering a well-hedged iron condor on a Monday can be a strategic decision that allows traders to set up a position with defined risk and potential profit while minimizing the need for constant monitoring.

This options trading strategy involves selling both a call and a put option at different strike prices, while simultaneously buying a call and a put option at even further out-of-the-money strike prices.

This creates a range within which the underlying asset can fluctuate, allowing for a profit if the asset remains within those bounds until expiration.

Once the iron condor is established, it is possible to simply monitor the position on a daily basis without the stress often associated with more active trading strategies.

By adopting this approach, you can maintain a balanced lifestyle while still participating in the markets effectively.

𝙈𝙮𝙩𝙝 #6 – Buying Options is the Best Way to Make Money

Reality: Buying options offers limited loss but demands strong and fast directional moves.

If the Nifty index experiences a modest movement of merely 50 to 60 points over the course of two days, it is essential to understand that your options may still experience a decline in value, primarily due to the phenomenon known as time decay.

Time decay refers to the reduction in the value of options as they approach their expiration date.

This decay is particularly pronounced for out-of-the-money options, which can lose significant value even if the underlying asset, in this case, the Nifty index, does not move substantially.

As the expiration date draws nearer, the time left for the option to become profitable diminishes, leading to a decrease in its extrinsic value.

𝙈𝙮𝙩𝙝 #7 – Options Are Too Risky

Reality: Options are only as risky as the way you use them.

Buying a put to hedge a portfolio or selling covered calls against NiftyBEES are low-risk strategies even for beginners.

✅ Final Thoughts

Options trading isn’t as mysterious or dangerous as the myths make it out to be. When approached with logic, strategy, and proper risk control, it can become one of the most versatile tools in your trading journey.

The key is to move past the noise, educate yourself, and build a system that suits your personality and capital.

Remember — myths fade when you replace fear with understanding.

Just published writing "𝙊𝙥𝙩𝙞𝙤𝙣𝙨 𝙏𝙧𝙖𝙙𝙞𝙣𝙜 𝙈𝙖𝙙𝙚 𝙎𝙞𝙢𝙥𝙡𝙚" — a book I wish I had when I started. 

If you're curious about options but hate the jargon, this might help.