Is option trading considered gambling or investing?

Is option trading considered gambling or investing?

Options trading is more along the lines of gambling. You are basically betting that a stock will be above or below a specific price within a specific timeframe. Whereas you can hold your position in a stock for as long as you want (not considering other factors).

When does something constitute as gambling?바카라/ I see gambling as when you take a “chance” on something “hoping” for a desired result. For example, starting a business. You saw a chance to start a juice business because everyone is more health conscientious and hopes it’ll make a ton of money. You have no prior knowledge, plan or put in the work to make it successful. Its kind of like hitting for the home run.

In terms of investing in the market, you essentially saw value in company and decide to purchase shares and see the value of your investment increase over time as long as the company is fundamentally sound, continue to be innovative to grow and is profitable which in turn is reflected in the stock price. However, isnt it important to “put in work” in researching the company, knowing their fundamentals, future projections and etc before you truly invest in them? For example, would you rather invest in Amazon or Bellus Health? Probably Amazon since you have some or alot of knowledge about amazon, general idea of what they do and have a higher probability of ROI.

So from the two parts we see that unless you know how to do something (or put in the work for knowledge) you are simply gambling. The same goes for option trading. Option trading can be used as an investment tool (ie: hedging). But more importantly, options is a very versatile financial instrument where money could be made whether the market is up, down, sideways, slightly up or slightly down. However, it is important to understand what an option is (intrinsic vs extrinsic, the greeks etc), how it works, technical analysis, have a risk management plan and a proven strategy (test via paper trading) that works. Instead of “guessing” where the stock might go, implementing what you’ve learned adds more probability for a trade to work out.

– gambling is when you take a chance (no prior knowledge) on something and “hoping” you get a desired result
– Have to put in the work by learning the ins and outs of something in order to add more probability of it working out for you.