How much do options traders make? It depends on what kind of company they work at, the years they’ve been doing it, the size of their portfolio, and other variables.
But in general, options traders can earn between $120,000 and $500,000 annually, an average of around $185,000 annually.
Of course, these figures vary widely from one industry to another and from one options trader to another, so you need to understand the details before becoming an options trader yourself.
In this article, we will explore how much an options trader makes. Options trading salary and job description, including what an options trader does, their responsibilities, and more.
See if it’s the right career for you. Here are some things you should know about this lucrative career path
SEE ALSO: Fixed Income Trader at Norrenberger
What Is an Options Trader?
Options traders are individuals who work on the floor of an exchange or in the OTC market and trade options contracts.
They buy and sell options to profit from the difference in the price of the option at the time of purchase and the cost of the option at the time of sale.
The two types of trades that options traders most commonly take part in are call and put trades.
A call trade is when a trader buys an option from another party for the current trading price.
If the option goes up in value before it expires, the trader has made money on his investment.
For a put trade to be profitable, the underlying asset needs to decrease in value before it expires; this would allow him to make money by selling his put back at its original cost plus any additional premiums paid during that period.
Options Trader Job Duties
The following are the responsibilities of an option trader
- Opening trade orders
- Closing trades
- Managing trading risk
- Monitoring market activity
- Negotiating prices
- Calculating profits/losses
- Communicating with clients
- Monitoring market activity includes using financial news to decide when to buy or sell stocks based on changes in market trends.
- Options traders must also keep up with new regulations set by the Securities and Exchange Commission and understand how these changes could affect their trading strategy.
- There is a lot of research involved in this position because traders need to be able to find different companies that might be profitable for their investment strategy.
- Options traders work in teams, so they must communicate effectively with their coworkers.
SEE ALSO: How to Trade Stock Online
Job Description
The job description of an options trader is to buy or sell financial options connected to the underlying assets.
Options give the right but not the obligation to buy or sell an asset at a specific price in the future.
A call gives you the right to buy a security at a set price, while it gives you the right to sell it at that price.
When buying these contracts, they expire on either their own or on the expiration date if it has been purchased before then.
Options traders need to know how markets work and how prices are determined for various assets, including stocks, bonds, commodities, currencies, and many others.
Options Trader Salary (See What You Will Make and Why)
As an options trader, you can expect a very competitive salary. The average salary for an options trader is $185,000 per year.
However, salaries can range from $125,000 to $300,000 per year, depending on experience and the size of the firm you work for.
Options traders typically work for banks, hedge funds, or investment firms. They may also work for brokerages that specialize in trading options.
This salary range is due to factors involved in determining your final pay.
Options traders are often paid a base salary plus bonuses, which depend on how well they perform their job.
Bonuses can be based on how much money they make for their company, how much revenue they generate, and how profitable their trades are.
If no profitability is involved with the trade, then bonuses may not be as significant.
For example, if an option trader sells stock short and makes a profit, then he would get his regular paycheck plus a bonus based on the gains made by his company’s shares sold short during that period.
If he had just bought stock but didn’t sell it, then he would only get his regular paycheck without any bonus attached to it.
SEE ALSO: Achieving A Career In Currency Trading
Conclusion
In conclusion, an options trader’s salary can vary based on experience and the type of firm they work for.
However, the average salary for an options trader is around $185,000 per year.
The job of an options trader is to buy and sell options contracts on behalf of their clients.
They must have a strong understanding of the market to make profitable trades.
