Why 95% option buyers loose their money in option buying

The statistic that 95% of options buyers lose money is often cited in the options trading community, but the reasons behind this high failure rate are not always clear. Here are some possible explanations:

1. Lack of Understanding: As mentioned in the previous article, one of the most common mistakes that options buyers make is not understanding the basics of options trading. Without a clear understanding of how options work, traders can easily get confused and make poor decisions.
2. High Risk: Options trading is a high-risk investment strategy. Options buyers can lose their entire investment if the underlying asset doesn't move in the direction they anticipated, or if they don't manage risk effectively. Many traders underestimate the risk involved in options trading and don't have a proper risk management plan in place.
3. Overconfidence: Another reason for the high failure rate among options buyers is overconfidence. Traders who have had success in other markets, such as stocks or forex, may assume that they can apply the same strategies to options trading. However, options trading requires a different set of skills and knowledge, and overconfidence can lead to poor decisions.
4. Short-Term Focus: Options buyers often focus on short-term gains and forget about long-term objectives. This can lead to impulsive trades and a lack of discipline. Successful options trading requires patience and a long-term perspective.
5. Market Volatility: Options trading is particularly sensitive to market volatility. If the market is unpredictable or volatile, options buyers can lose money quickly. Many traders fail to account for market volatility when making trading decisions, which can lead to significant losses.
6. Herd Mentality: Finally, options buyers can be influenced by herd mentality, where they follow the crowd and make decisions based on the actions of others. This can lead to poor decisions and herd behavior, which can be dangerous in options trading.

In conclusion, options trading is a high-risk investment strategy that requires a clear understanding of the basics, proper risk management, and a long-term perspective. The high failure rate among options buyers can be attributed to a variety of factors, including lack of understanding, high risk, overconfidence, short-term focus, market volatility, and herd mentality. To be a successful options trader, it's important to avoid these common mistakes and develop a disciplined, patient, and informed approach to trading.