Do I have to invest in futures and options?

Question

I bought some stocks last year and made some good money but my friend said I should buy some futures and options to maximize my profit. What are they? Do I really have to invest in them?

Answer 1

Your friend is an idiot.  Anyone who does well with options would never advise a novice to get involved.  Let's just say it is very complicated to the point of not even understanding the math no matter how hard you try.  Even most folks who are very successful at stock investing know they don't have the smarts for option trading.

Answer 2

Read about them on investopedia.com. You do not need to buy them. Maybe years down the road youll feel more like gambling. Options and futures are much more gambles than just your average stock.

Answer 3

Never buy something you don't understand.  Options are risky.  Ask your friend who knows so much to explain the Black-Scholes formula of options pricing with respect to the lognormal distribution.

Answer 4

You don't have to, and if you don't know what they are, then you shouldn't.

Answer 5

Go ask him how much money he's actually made off derivatives. Brokerages have to go out of their way to attract new customers for derivative trading because of people failing to make money.  

Answer 6

Rookies should stay away from Several investments: Bitcoin and crypto's, Futures, Penny Stocks, Forex, Options, and Anything you do not Completely Understand. 

Answer 7

No, you do not have to invest in options and futures.

Options and futures are called derivatives because the derive their value based on the value of an underlying security.

One thing your should understand about options and futures is they are contracts between two investors which makes them "zero sum" games, which means for every dollar one investor makes on a contract another investor loses a dollar on the same contract.

The stock market is not a zero sum game. If the price of a stock goes up everyone who owns the stock gains.

Another thing to understand about options and futures is that the contracts are for a fixed time period. At the end of that rime period the contract ceases to exist, so it makes no difference what happens later. Stocks do not expire.

A third thing to understand is that options and futures are leveraged, so a relatively small change in the price of the underlying security can make a big change in the price of options and futures contracts.

Put together these things make options and futures far riskier than stocks. However, the increased risk may be rewarded by much larger percentage gains. Of course, much larger percentage losses are also possible. 

Answer 8

Why don't you ask your friend? 

Answer 9

Your friend is not the Investment Police.   No, you do not have to do what your friend says.     And it doesn't take a genius to know that you probably shouldn't invest in something you know nothing about.

Type "what are options and futures" into your favorite web browser.   No one here is your unpaid personal research assistant.