The big question when someone studying the option trading world is this: Can options trading make you rich?

When they begin to understand how do options work, many traders realize that if they manage to correctly predict the right direction of the asset, they can get rich trading options with an extremely simple strategy.

This article will show you which option strategy is most profitable in terms of profit and loss ratio, but if you want to learn the difference between stocks vs options, we can also help you.

In any case, in this article here, you will see with your own eyes what is the reality that option trading offers us. After showing you the data, we will discuss the real question: can trading options make you rich?

Let us get to it!

Which option strategy is most profitable?

Believe it or not, the most profitable option strategy is the easiest and simple to use: buying call options or buying put options.

To explain why this is true, we will take a look at the profitability of these two options only when we are buying them. Of course, option selling also is profitable. Still, as you know, these strategies (like any other selling strategy such as the Iron Condor, for example) will limit your profits in every trade.

Of course, there are plenty of other options trading strategies we can use to profit in the market. But if you want to learn how do stock options work first, we highly recommend you to take our completely free options trading guide in which you will everything you need to know to begin, plus a free options calculator!

Can options make you rich? – An Example with an Out of the Money call option

To get rich trading options and become successful options traders, we will need some time, effort, and great risk management. In this case, what we are going to do is take a look at a real example of buying a call option.

Let us assume that we performed a technical analysis on the company Roku, whose implied volatility is quite high these days compared to the rest of the companies.

The implied volatility will make the stock price move faster with a higher probability. We have assumed that Roku’s shares will start to rise soon, and we believe that it will be quite a strong movement.

We will access the option chains, and we will buy a call option with 30 days to the expiration date and a strike price of $80, when the underlying price is at $78. In other words, we are buying a slightly Out of the Money call option. Besides, we have also checked that implied volatility is 36%.

So, the premium we will have to pay to buy this call option is $2.40 per contract. Once we buy the call for $240, we will have to wait for the underlying price to surpass the strike price within the next 30 days.

Can we get rich trading options? – Let us take a look at the expected results

The best way to learn how our call option will perform is by using our Advanced Options Trading Calculator Excel to represent the entire graph of the strategy.

This particular graph for the call option will make a decent profit if the underlying begins to rise. If it reached $95, our premium increases to $1260, for example. Let us take a look at the entire table of values here.

Red column is the premium at the expiration, while the yellow column is the premium at the current date

Considering that the price is moving around $6 a day, these increases are not at all unreasonable in those 30 days.

Can option trading make you rich? – Profit/Risk Ratio

Following the previous example, we are now going to assume that the underlying will not reach $100 until the day before expiration. That means that we have a profit of $1,760, and knowing that we have paid $240 for the contract, we are obtaining a 7:1 profit/risk ratio!. In other words, we are looking at an extremely profitable operation!

If we had replicated this operation with nine more contracts, we would have paid a total of $2400 to make a profit of $17600, and all this within one month!

Surely, if we made this kind of trade a dozen more times and reinvest all the profits, we can indeed claim that we can get rich trading options!

As you can see, the worst-case scenario is losing $240, no matter what happens in the stock market. If we manage to pick the right trades with such risk management, it is not very hard to get rich trading options.

Okay, it cannot be so easy to get rich trading options, so where is the catch?

Well, as we saw in this article, when we are on the buying side, time decay will play against us, devaluating our option premium little by little if the underlying does not move.

However, as we mentioned before, we are also calculating profits when time decay completely devalued the option. This is the worst possible scenario when the extrinsic value is zero. We are trying to be as realistic as possible.

The other negative point is that we are dealing with an Out of The Money option. In other words, if the underlying does not reach the strike by expiration and a little more, we will lose all the money invested, unlike an In The Money option contract.

If you want to learn more about the differences between buying an In the Money or an Out of the Money option contract, you can do so here.

In this case, we have not picked an In The Money contract because we wanted to use the effects of the greek gamma to take a better profit/loss ratio, which is key to get rich trading options!

Can stock options make you rich then?

What stops most traders from profiting with these trades is the simple reason that it is not always so easy to find these movements in the market. But it is possible.

We will need a robust technical analysis to be able to participate in such movements, but it may take years to develop a trusted trading system that actually works.

Luckily, there are very powerful tools like the one offered by Options Pop. Their tool will do all the technical analysis working for us. They will warn us of which companies are about to make sudden moves, telling us when and where to place our money by buying put or call contracts.

If you think technical analysis is too complicated, Options Pop can help you solve this problem. They will notify us about three possible trades each week, with a very high probability of profit for the following 9 days.

Are you interested in this tool? You can check our review here or visit their home page through this link.

The bottom line then: can options trading make you rich?

Can you get rich trading options then? The short answer is yes.

You can get rich trading options as long as you know where to place the money and have the ability to detect the right movements.

About which option strategy is most profitable? Without a doubt, buying calls or puts.  With a bit of patience and with several winning operations, we will amass a good fortune.

Of course, any of the option selling strategies will also help us make money, but the main disadvantage of this is that we will always limit our profits to the premium value of our option contract.

If we can detect the strongest moves in the market with a proper technical analysis, buying contracts is the answer. Of course, we need to understand how do stock options work by learning what a call and a put option are.

What do you think? Can options make you rich?

The most complete Black Scholes Option Pricing Model Calculator to help you in your trades

Risk management in options trading is all, and to be able to have control over all our trades, we have designed an Advanced Option Trading Calculator that will help you create every option trading strategy you want.

This calculator includes a breakdown of the strategy, showing us the maximum gain point, the maximum loss point, and the break-even zones, as well as the strategy profit/loss curve, both at expiration and at the current date.

If you want to know more about the features, the Advanced Option Trading Calculator provides, check this link to learn more.

Get the Advanced Calculator!

Having the necessary tools to trade with options is essential, as it will help us to make better decisions, take better entries and exits and in general, have much more control over the risk we face. That is why we should always trade options with a Black Scholes option pricing model calculator.