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Hey everyone, Kirk here again. Welcome back to the daily call. Today’s call is a very important question that I want to answer and spend the time answering today which is, “Why do people buy options if option selling is more profitable?” Huge question that I get. I mean, really… Hopefully if you saw the title of this podcast, you’re like, “Yes! Finally, Kirk! Let’s answer this question.” Because we inevitably get this or I inevitably get this all the time. In fact, every week as we do our free onboarding webinars even with people who signed up for pro and elite membership, they start going through the trainings and the courses, they realize how profitable it can be to consistently and religiously sell options, but the question then becomes, “If it’s so profitable, why do people buy options? Why is there another side of the track?” And so, I want to answer that today in probably three parts because I think there’s three main areas or reasons why and then everything else kind of dumps into these three. These are the three reasons that we’ll go through here today. The first reason I think people buy options is pure gambling or speculation. It can’t go unsaid that even though something is known to not be profitable for them, doesn't mean that they have enough wherewithal to not try to make it profitable because we've all heard stories or seen videos of some guy on YouTube with a Ferrari that he rented in the background or whatever the case is and they made all this money trading options or we even see this mostly in stock trading, day trading, penny stock trading, you name it, we see this all over the place. Gambling and speculation is rampant and people are always trying to invest a little bit of money with a huge upside potential. In fact, a lot of the mania around Bitcoin, Litecoin, Ethereum, Ripple, all of that is all based on speculation and gambling at this point. Is there an underlying fundamental to these things? Sure, maybe. But is that the reason that people are getting into them? Absolutely not. People are getting into them, assuming that they can put in $1 and make $10 back. That’s the first thing. You have to understand that some people are just flat out gambling and speculating and are trying to make a quick buck. Number two (and this is I think where most people end up, in this range and definitely more on the institutional side) is hedging or insurance. Buying options gives you the ability to hedge a position. You could buy a contract in some related industry, some related ticker symbol, a related company in a sector to hedge another position. In fact, many hedge funds and institutions, financial firms, etcetera. If they have a long position or a big position in something, they might hedge it with something else. That's where it comes into play. Now, they know or they assume that that insurance is going to be something that is basically spent money on and gives them protection, but they hopefully don't use. I relate this a lot to insurance on your house or your car. Everyone buys insurance on their house or their car. Most places, you have to buy insurance. We all know that it's really a losing proposition at the end of the day because we’re not often going to be forced to use that insurance, meaning our house is not likely to burn down, we’re not super likely to get into a car accident every time we get in the car. But we have to have that in place because in the inevitable event that it happens, we don't want to take the full brunt of that risk, so we'll sacrifice a little bit of money now for the ability not to have to take or bear the full burden of that financial catastrophe. Again, this is why people buy options. They would buy put options on a stock because they have a huge stock position and God forbid, the stock crashes, they don't want to bear that entire financial responsibility themselves. Now, as an insurance company, (and this is how I think about options trading) that also means that insurance companies don't ensure one single vehicle or one single house. I mean, could you imagine if GEICO or any of these insurance companies out there ensured one house? That’s it. Every year, they picked one house to ensure and all of their money was tied up in that one house. That’s not a good way to run their business, so they ensure lots and lots of houses, lots of cars, lots of people, so that if God forbid, a house burnt down or there’s a car accident, yes it would sting, yes it would hurt financially, it’d be a big downside risk for that individual house or contract based on how much they collected in insurance money, but it’s not going to impact the overall portfolio. The business is still going to keep running. And so, we should do the same as options traders. Just as a little bit of a sidebar there. Number two again was hedging or insurance. Number three is that they do it as part of another spread. This is probably where again, I would say the second big chunk for sure of options trading comes into play is not necessarily that somebody is gambling or deliberately hedging or having insurance, but they’re just doing it part of a spread. We do a lot of spreads here at Option Alpha. That means that if a stock is trading at $100, I might sell a 105 call and buy a 110 call. Does that mean that I'm totally speculating and gambling on 110 of the stock going higher? No! It just means I’m doing it part of a spread and that means that somebody else, some other option seller could sell the 110 call individually just as a single naked call option. I assume that my 110 call is going to be out of the money and worthless and that's fine with me because I’ve already priced it into my strategy and they end up making money, I still maybe end up making money on my spread overall because I sold the 105 and bought the 110 for a net credit. I think that’s the other big part of it, is just people are just doing it as part of spreads. It’s not that they’re individually looking at that contract and saying, “Am I going to lose on this? Should I trade it?” It’s just part of the spreads and the strategies that they’re putting together. Hopefully this helps out in just gaining some clarity on why people do it. Like I said, just the three main buckets that people fall into in this case are gambling or speculation, hedging or insurance and then number three is just doing it as part of a spread, as part of other option strategies that they’re already doing where they’re selling one contract and buying another. As always, if you guys have any comments on this, any questions, let me know and until next time, happy trading!