I was at a seminar preview yesterday where the presenter was trying to sell an options trading strategy as part of a investment course.
The options trading strategy was supposed to yield about 2% a month and involved selling options.
The presenter even showed us screenshots of his actual trading account, which recorded all the premiums he collected from selling the options.
One part of the strategy was actually a covered call strategy, which was less risky than selling a naked call.
When asked about the risks involved in using such a strategy, the presenter mentioned that there was zero risk. Either you made money each month, or if you couldn’t make the trade, then you simply do not make any money in that month.
I think it’s a bit misleading as offhand I do know of at least one scenario that will lead to losses in using a covered call strategy.
My guess is that the presenter had not encountered that scenario yet as he had only been using this strategy for a few years, where the market had been mostly in an uptrend or sideways.
Singapore adopts a buyer’s beware approach when it comes to a purchase of an investment product. This is similarly applied when you sign up for an investment course. A buyer’s beware approach only works when the correct facts are presented.
Unfortunately, this is not going to happen all the time. You don’t even need to attend the seminars. Just open up the newspapers to see the claims that being advertised and you will know that some of them are just downright outrageous.