For high-net-worth investors, selling options can be an alternative approach for targeting higher returns if one is comfortable with the associated risks. The following are reasons to consider selling options.
1. Time value works in favor of individuals selling options. As an option loses value over time, selling deep out of the money options is a method for taking advantage of time decay.
2. Committing hours each day to trading the market may not be necessary, as fluctuations in underlying markets can have less impact on deep out of the money options. This allows sellers to invest in longer-term market fundamentals.
3. Options are available in a variety of markets. By focusing on tangible commodities, like wheat, beef, sugar and gold, options sellers can trade in markets that derive their value from supply and demand.
Futures and options trading involves risk of loss. Past performance is not indicative of future results. Only risk capital should be used.