Is Options Trading Gambling?

Life is full of risks.

Every decision is a gamble, whether you’re crossing the street or starting a new job. This is especially true when it comes to your finances. To those without the right knowledgebase, stock options investing can appear almost indistinguishable from pumping quarters into a slot machine. It’s hard to know how to invest your money without risking it all. Moreover, it’s really challenging to find a method for investing that works for your budget while yielding consistent returns.

When people ask, “Is options trading gambling,” the simple, undeniable answer is, “Yes.” Any time you put money in the stock market, real estate, collectibles, or any other investment, there’s always a chance you’re going to lose. Anyone who tells you that an opportunity will deliver a surefire 100 percent return on your investment is either poorly informed or criminally motivated. 

So, yes, there’s some risk involved with options investing, but it is in no way as dicey as traditional gambling outlets like casino gaming or sports betting. In fact, with the right approach, resources, toolset, and strategies, you can manage your risk with options investing and establish a means for generating consistent returns month over month and year after year. 

Casinos are Businesses

The global casino and online gambling industries currently maintain a market share of $230.86 billion. The Nevada Gaming Commission reported that casinos on the Strip in Las Vegas collected $2.1 billion in gambling revenue during the third quarter of 2021. Even in the midst of a pandemic, more than 29 million people visited Nevada’s very own Sin City last year to roll the dice and check out the attractions. Sure, Vegas offers plenty for tourists to enjoy while they’re on vacation but 73 percent of visitors spent time gambling while they were in the city of Lost Wages. 

The people who build those multi-billion dollar Las Vegas casinos or operate their own betting parlors, online gaming platforms, and other gambling businesses did so to generate a profit. These are not nonprofit organizations looking to give money away to people who try their hardest at poker, blackjack, or any other game of chance. Just like any business, gambling establishments exist to make money for the owners and shareholders. 

Every single game on the floor, from slot machines to blackjack, is designed to favor the house (i.e. the casino, online gaming site, etc.). The odds are always greater for the casino than they are for the player, sometimes substantially so. A perfect example of this is Roulette. It’s a simple enough game. Pick a number and if the wheel hits your number, you win. A Roulette wheel has 38 spaces, giving you 37 chances to lose. That means your odds are 38:1. Worse even, Roulette pays out a maximum of 36:1 on a single number bet.

The odds in a gambling enterprise’s favor, also known as the house edge, vary game to game. While some games generate a 1-2 percent profit, others may turn a 25+ percent profit. But you can bet on one thing at any casino: the proprietors know exactly how much money they’re going to make off every game and machine in the facility. 

With all of that said, people can’t wait to spend their paychecks gambling either in-person or online. They know there’s no way to beat the house. But that doesn’t stop them. Sure, you may score big on a single hand, but the casino knows the more you play, the more likely they are to take what you won and then some. Yet the thrill of gambling is undeniable. 

The Psychology of Gambling

We rarely think about the actual responses and reactions triggered in our brains by the activities we engage in regularly. You don’t think about brushing your teeth. You simply brush them the way you have since you were a child. What’s going on behind the scenes in your brain is a symphony of functions working together, from controlling the angle at which you hold your hand to ensuring you don’t accidentally stick the toothbrush down your throat. 

Consider what’s happening in your mind when you gamble. Maybe you think about your excitement or the anticipation of winning. Possibly you ponder the different tips and tricks you’ve learned to potentially improve your chance of striking it rich. But each decision you make is actually the result of psychological patterns that draw you further into the game you’re playing. 

For example, there’s the gambler’s fallacy. This occurs when a person believes they can predict what happens with each hand based on the performance of the previous hands played. Let’s say you’re at a casino and you notice someone playing a slot machine that keeps paying out for anyone who pulls the handle. After watching for 30 minutes, you decide to play that same slot machine because it seems like a sure bet. It’s simply by chance that several people won on the same machine right in a row. Your odds are no better because of repeated prior payouts. Still, you feel certain you’ve made the right call.

The rush of potentially hitting it big is just as addictive as any drug, and gamblers continue chasing that high regardless of their losses. Similar to the instantaneous gratification of drugs, alcohol, or cigarettes, gambling triggers reward pathways in the brain that leave you liking and wanting more. Eventually, the addiction problem stems from wanting more because you need a higher quantity to achieve the same feeling you experienced the first time you got drunk, high, or won big at the casino. That means the person with the addiction requires more vodka, cocaine, or online poker to sate the want they experience.

One of the primary reasons people ask, “Is options trading gambling,” is due to the fact that there’s similar psychology involved with both activities. Admittedly, there’s an unmistakable thrill when you’re winning, whether it’s at the casino or on Wall Street. It’s possible for options traders to extract the same kind of excitement by placing successful trades that gamblers get when a bet pays out big. There’s always a thrill when you see your investments work. While similar on that psychological level, the practical difference between the two, investing and gambling, is utterly enormous.

Those people who hit the casino floor in hopes of getting lucky are pinning their financial future on practices that offer little-to-no safeguard against total loss. In fact, most gambling outlets are genuinely hoping to squeeze as much cash out of their players as possible before sending them on their way. The same can’t be said for options trading. When investors utilize responsible risk management techniques, they can put a firm basement on their losses from day one. That’s an opportunity gambling simply doesn’t afford.

Are the Odds of Gambling and Investing the Same?

From the outside, it seems like there’s no difference between placing a bet at a casino and making a trade on the stock market. True, both of these activities involve risk, but risk is much different with gambling, trading, and investing.

When you hit the casino while you’re on a trip or out on the town, every game that draws you in has a fixed rate of probability. We’ve already said that a single-number bet on a roulette wheel carries a fixed 3 percent rate of success. A game that involves the use of dice, like craps, has a fixed rate of return. That is, for every one number on a die you bet on, you have a 16 percent chance of success. That’s to say nothing of the almost incalculable odds stacked against people who frequent slots or video poker machines.

When you buy a traditional stock, you also have a fixed rate of probability. The stock will go up or it will go down. You’ve got a 50 percent chance of success.

That’s not the case for options investing, which offers a wide selection of probabilities. Investors who exercise the strategies taught at Record Options Investing have some degree of control over the probability for success in every trade. Want to put money down on a trade with a 90 percent chance of success? 50 percent chance? 75 percent? You can do it with options investing.

In short, when you sit down in a casino or drop money with a sports bookie, you’re gambling in an environment that is indisputably stacked against you. You might be able to control some of the risk involved, but it will never fall in your favor. When you’re investing responsibly, you can determine the level of risk and reward in every investment in your portfolio.

Short-Term Options Trading is Gambling

At ROI, we also eschew the inherent risk of short-term options trading. Think of short-term options trading as putting a bet down on a sporting event. On the surface, betting on the outcome of, say, the Super Bowl, might seem like a fixed-rate of probability. Either one team wins or the other one does. That’s not the case, however. Your odds of success in a sports bet are never even. A star could get hurt. It could snow on game day. The stadium could fall into a sinkhole. Any number of factors could impact the short-term odds surrounding your bet. 

The same is true for short-term options investing. Given the current daily volatility in the stock market, it seems anything could happen over a one or two week period of time. Still, the long-term trend for the stock market is upward. In other words, by investing in companies with a long-term pattern for growth, an options investor can avoid the potential pitfalls of short-term trading and use a prolonged period of investment as a cushion that allows them to strike when the time is right.

You could say that if there’s an art to gambling, it’s in the power to improve your odds in every way possible. With options, you can learn how to tip the odds in your favor with ROI’s proven education program and insights. 

A Gambler’s Skillset

Consider this: those people who hope to succeed at gambling devote hours of their life to research. They try to count cards or practice throwing dice. Even casual sports gamblers spend hours examining data examining practice reports and injury reports. They watch interviews and listen to experts. They pay attention to weather conditions.

In spite of all that work and preparation, gamblers still lose. In 2017, the average American lost a little over $400 gambling. It’s a guaranteed money loser. That was prior to a pandemic that has seen a staggering rise in online gaming and sports betting.

If someone took the same amount of research time as it takes to (almost definitely) lose their gambling money, they could generate a substantial financial cushion. Let’s look at an example. If a sports gambler took their annual expected gambling losses ($400) and invested it in the stock market. Then, they took the extra step of adding just $25 a month to that starting amount. Utilizing the investment techniques provided by Record Options Investing, it’s possible to generate a 10 percent return on your initial investment. After 10 years, your account would have swelled to more than $7,700.

Why devote yourself to learning a process that will almost invariably let you down, when you could apply your hard-earned skills to an activity that could provide another income stream for you and your family?

Strategic Options Investing is Not Gambling 

When someone asks the question, “Is options trading gambling?” the answer depends on the person purchasing the contract. A gambler is someone looking for an instantaneous thrill. Winning at a slot machine or playing a successful hand of poker provides a rush of endorphins in the moment. That’s not the case for successful options traders. Oh, that rush of endorphins can still arrive when an investment pays off, but investors’ plans play out on a longer timeline than gamblers’.

There is a reason that society takes pity on those afflicted with a gambling addiction while successful investors are considered aspirational figures. Gambling is intended as a recreational pastime, as a method of entertainment for people on vacation. It is not a way to accumulate money. Rather, gambling is a way to spend it. The odds of losing in Vegas are so guaranteed that you can literally calculate what you’ll probably lose over a period of time. 

• Playing blackjack for an hour at $15 a hand? Expect to lose about $5 an hour.

• Pumping quarters into a slot machine for an hour will lose you $8.

• Having fun playing roulette at a full table? That will run you $28.

When you’re gambling, you’re not betting if you’ll lose money, you’re betting how much money you’ll lose and how long it will take to do it. If you think that buying scratch-off tickets or playing a hand of poker is a critical part of your retirement plan, it’s time to reassess. There’s a better way to provide for yourself.

How to Avoid the Pitfalls of Gambling as an Options Investor

As we’ve stated time and again throughout this piece, there is almost no way you’ll come out ahead when you’re gambling. You’re destined to lose because the fix is already in. A casual observer may confuse stock market investing as a somewhat similar trap, but it doesn’t have to be. 

When an investor takes on the stock market armed with a higher degree of financial literacy, they dramatically increase the chance that their investment will see a positive return. Unlike in gambling, smart options investors can take control of their win-loss probability and funnel their investment dollars into situations that make sense for their portfolio. 

Successful investment isn’t about hoping you’ll win in a system that’s rigged to beat you. It’s about learning to truly turn the tide in your favor. An educational platform like Record Options Investing is the way to do it.

So, “Is options trading gambling?” Not when you do it the right way. Not when you enlist the guidance of a financial education platform that can teach you to trade successfully and start building the financial future you deserve.

Ready to improve your financial literacy and learn the distinction between unguarded risk and safe long-term investments? Record Options Investing is ready to shine a light on the world of options investing. Sign up today.