Trading has better odds than gambling

Trading has better odds

How many times have you heard someone describe options trading as similar to casino gambling? We show you that Trading has better odds in fact much better than gambling.

What is the difference between gambling and investing? In order to differentiate between the two, we should start by defining them. Comparisons are often made between the two activities, but I’ve never seen the terms explicitly defined.

If you’re sufficiently motivated, I encourage you to try to define the terms ‘gambling’ and ‘investing’ before you continue reading this essay… you may surprise yourself. (Go ahead, I’ll wait here for you.)

What definitions did you come up with? Are investing and gambling mutually exclusive, or is there an area of overlap? And are the boundaries clearly delineated, or is there a gray area in the middle?

Let’s see what the dictionary says. Here’s what the Random House dictionary on my bookshelf says:

  • Gamble: “To play at any game of chance for stakes. To stake or risk money, or anything of value, on the outcome of something involving chance.”
  • Invest: “To put money to use, by purchase or expenditure, in something offering profitable returns.”

Both seem reasonable upon cursory review, but a closer look reveals that they’re not terribly helpful. The definition for gambling could apply just as well to investing, and vice-versa.

The Dictionary .com web site says:

  • Gamble: “To bet on an uncertain outcome, as of a contest. To take a risk in the hope of gaining an advantage or a benefit.”
  • Invest: “To commit money or capital in order to gain a financial return.”

Again, the distinction isn’t clear. In investing, are you not betting on an uncertain outcome? Are you not taking a risk in the hope of gaining an advantage or benefit? In gambling, are you not committing money? Are you not doing it in order to gain a financial return?

source  investorguide

Of course, both activities require risk management and an edge in order to gain an advantage; however, most people forget the biggest challenge with trading is that you deal with variables that can suddenly change at any time – for example, the market. And when it makes a major shift, losses become more common. Of course, this is especially the case when you trade a strategy that doesn’t match the current market.

Source: Investorguide

You can sell options and create a defined risk strategy. I rather sell options so that I receive premiums and know that I have more percent chance of profit than loosing.

Trading has better odds than gambling

Black jack dealer in Vegas only has a tiny edge over any particular player at his table. Yet if players sit there long enough, the dealer will eventually get all of their money. This exemplifies the power of using applied odds over time. The strategy of selling options is, at its core, a strategy of using applied odds over time.

The fact of the matter is, you can choose to sell options for premium with a 68 or 84% chance of expiring worthless. When is the last time you got those kinds of odds buying a stock? While risk of loss is always present, as an option seller, you gain the Confidence of knowing you are now trading with the percentages. The fact that most investors don’t know how to harness these odds is not your problem. Let it be theirs.

 

“The strategy of selling options is, at its core, a strategy of using applied odds over time.”

 source: Optionsellers
Conclusion
With gambling or poker you depend upon the cards you get and the other players. The odds are in the favour of the house. Trading has better odds. You can determine many factors at order entry. The amount or risk you will take and the chance you have to make a profit. And with taking profits early you can increase the number of winners and let your portfolio grow.

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