Options trading can be a lucrative endeavor, but it’s also a risky one. That’s why it’s important to choose a reputable money manager. However, with so many options managers out there, how do you know who to trust?
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In this article, we’ll discuss some of the key things to look for when choosing an options manager. We’ll also provide some tips on how to avoid the bad apples.
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How To Avoid Bad Money Managers In Options Trading
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What to Look for in an Options Manager
When choosing an options manager, there are a few key factors to consider:
Experience: What’s the manager’s experience in options trading? How long have they been in the business? Do they have success managing comparable assets or have experience within the niche you are looking to trade in?
Track record: What’s the manager’s track record? Do they have a history of making consistent profits? How have they performed during different market conditions? Do they provide data that supports their claims on their track record?
Fees: How much does the manager charge for their services? Are their fees reasonable? their fees higher than other comparable managers in the field? Research industry benchmarks and compensation structures.
Investment philosophy: What’s the manager’s investment philosophy? Do they use strategies you are comfortable with? Do they take on too much risk in your opinion? How does their investment strategy compare to your overall objectives?
Communication: How often does the manager communicate with their clients? How do they communicate? Do they provide regular updates? Are they accessible if the investor has questions or concerns?
Red Flags to Watch Out For
Now that we’ve discussed what to look for in an options manager, let’s talk about some of the red flags to watch out for:
Unexplained losses: If an options manager has a history of unexplained losses, that’s a major red flag. Losses can occur in any investment and trading strategy, so its important to understand the reasoning behind any that occur. If the manager can’t provide a satisfactory explanation, it’s best to avoid them.
Unsolicited offers: If an options manager contacts you out of the blue, especially in a cold call, that’s a red flag. Legitimate options managers typically won’t contact you unsolicited.
Promises of unrealistic returns: If an options manager promises you unrealistic returns, run away! No manager can guarantee returns. Be wary of anyone who makes promises that seem too good to be true.
High-pressure sales: If an options manager uses high-pressure sales tactics to get you to sign up with them, it’s a red flag. Legitimate options managers won’t pressure you to make a decision.
Fraudulent practices: Unfortunately, there are some fraudulent options managers out there. These managers use a variety of tactics to deceive investors, such as using unlicensed brokers, lying about their experience, and forging documents. Do proper research and thorough background checks to avoid being involved with fraudulent managers or services.
Conclusion
Choosing an options manager is a big decision, but it’s one that’s worth taking your time with. By following the tips in this article, you can help avoid bad money managers and find one who will help you reach your financial goals.
