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Financial Trading & Investing | Is Options Trading Gambling

Dec 1

 

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Whenever you take any type of action that is risky and could potentially end in losses, it is looked on as gambling. We are sure that if you are into options trading, you have all heard that it is a form of gambling. Though there are many similarities with certain people, and it could end up being that way, it isn’t necessarily always the case.

The team at Capitalist Exploits understands the severity of gambling addiction, but some things separate the trading of options from gambling, just like there are similar things. So in this regard, we’re going to answer the question of options trading gambling and go over some factors to look out for to ensure that you aren’t falling into that pitfall.

How Is Options Trading Similar to Gambling? And How Does It Differ?

There are a lot of places where gambling and trading options cross paths. But serious options traders know that several things make it different from this tragic addiction. Let’s first look at the things that make it similar to gambling:

  • Losses – You have to be willing to accept some pretty big losses. No matter if you’re sitting at a poker table or in front of a computer screen looking at charts and graphs, whenever you make decisions having to do with money on risk analysis, there is bound to be some loss. In other words, there is a level of inherent risk that you have to be willing to accept, and for some, that is the rush of both gambling and trading.
  • Probability – It doesn’t matter how much you analyze the market and have watched all the trends, every decision you make when you’re trading is based on probability. Yes, you have numbers that show a pattern, but as we all know, patterns sometimes change. So just like in gambling, trading is done off of a probability-dependent system.
  • High Number Occurrences – This leads us to the last similarity between gambling and trading. As we said, probabilities and trends are crafted based on a certain number of occurrences. This means that you aren’t guaranteed 100% of any transaction being profitable. Just like with gambling, trading is reliant on these occurrences. Though with trading, you are much more analytical and careful when positioning than some people are when they are gambling.

There is really one major difference when it comes to trading and gambling. That is, when you are on the floor of a casino or at a poker table, you are spending your money frivolously on that wager. You tend to utilize emotions and rely on feelings to make your bets. If you are looking to be a successful options trader, you have to have a great deal of knowledge, and there is a lot of planning that goes into any type of transaction you make. 

This means that you put time and effort into analyzing markets, and you should never react to your emotions. For this reason, options trading is not the same as gambling. That being said, some individuals are more inclined to fall into the trap of utilizing trading as a gambling substitution. Because this is a potential issue, we wanted to make sure you understand what to look for and how you can be treated if it does happen.

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Gambling Tendencies That Could Cause A Problem

For those who tend to enjoy gambling, there are some personality traits you can watch out for that might be dangerous when it comes to options trading. This isn’t always the case, and these are just tendencies that gamblers often show. If you are someone who is prone to them, you might want to keep an eye on your options trading activities.

Social Pressure

One of the biggest tendencies when it comes to gambling is that you do things not because you’re interested in what you’re doing but rather because of social pressure. This is the idea of peer pressure that you were always told about when you were a teenager. 

Because you feel that everyone else is doing it, you don’t want to be left out, so you jump in headfirst. Deciding to make a few trades like this is not necessarily a bad thing, but when it becomes a regular occurrence, then it might be time to step back and really analyze why you are options trading in the first place.

Trading for Excitement

Options trading can be a great way to diversify your portfolio and build your wealth. But if you’re not doing it for that, and you’re simply doing it for the high you get because you’re taking a risk, then it could be a definite problem. Oftentimes gamblers do this with whatever they are looking to invest their time in. It’s more about their feelings and power than about the actual process of completing the activity.

Looking to Win

If you’re into options trading, you know that you will not always be profitable. In other words, you’re not always going to win. Many gamblers chase that and continue to do so until they’ve driven themselves into a place where they can’t get out of. This type of tendency is definitely one to look for because it could be detrimental not only to your health but also to your finances.

Signs To Watch For

Now that we’ve talked about some gambling tendencies that could pop up when options trading, let’s look at some signs that you should watch for:

  • If you notice that you are being less strategic and making riskier choices, you might have a problem. Along with this, if you seem to be always wanting to make bigger wagers and you need it to feel the rush, it might be time to see someone.
  • Obsession and preoccupation with certain stocks and markets that go above and beyond the necessary attention.
  • You find yourself skipping social and leisure activities that you once loved to focus on trading.
  • The only reason you’re trading is for the rush and pleasure.
  • If you have attempted to cut back on your time spent trading options and you just can’t seem to abstain from the activities.
  • You find you are completing your trades more on urges and desires than trading.
  • You are more stressed and anxious when you aren’t trading.
  • Many who have a problem with using trading as gambling find themselves having to lie about what they’re doing.
  • In desperate situations, some that have turned to trading as a gambling substitute find themselves stealing or taking out loans to keep their trades going.

These are all signs that perhaps the challenges and risks of trading have tapped into some underlying trigger and have made it more about the risk and gambling aspect of the profession than it is about the actual profession itself.

Final Thoughts

The answer is simple: if you find yourself saying yes to any of the signs above and feel like you have a problem, then it is time to consider your trading as gambling.

In the end, though, gambling and trading are two different things. Trading will only become a gambling problem if you have the tendencies and inclinations already present. Options trading requires patience and non-emotional choices and, therefore, can never be looked at as gambling. Still, there are a lot of good resources out there that you can utilize to help if you feel it has become a problem. 

 

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