Adrian Reid advises that new traders should not start with options trading because options are complex, have many contract choices (strikes and expiries), are generally less liquid with wider spreads (higher trading costs), and suffer time decay that erodes value if the underlying is sideways. He recommends mastering stock trading first before attempting options.
Options trading is not where you should start as a new trader, frankly. So if you're a brand new trader and you haven't traded before, I absolutely would not start with options because there's too much that can go wrong. There's too many moving parts. And it's a really challenging game to win because with options you're dealing with many different possible contracts. You've got a lot more choice because there's options for all different strike prices and all different expiry dates for all different stocks. And so there's a huge variety of them. Options are typically far less liquid than stocks, so the spreads you pay are much wider. That means the cost of trading is high and you have to be much better to break even. The next thing about options is that they have time decay. So if you buy an option and hold it over time, its value will go to zero, assuming it's out of the money. That time decay works against you. Whereas if you buy a stock and hold it and it goes sideways, you've still got the stock and it's still worth the same amount of money. If you buy an option and the stock goes sideways, the option decays over time. So there's so many moving parts and so much working against you that for a beginner it's really challenging to succeed. So I would say if you're not yet profitable trading stocks, I would not trade options yet. I'm not against options trading. I just don't think it's where a beginner should start because I think it's. There's too much to learn.
