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Failure is not an option

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'I locked in a profit of US$1,100 in one day during the training! Thank you Mirriam - the True Guru of Financial Freedom!' - Shamsheer Ahmed, Singapore

Or so goes a typical testimonial for an organisation called Wealth Mentors, a for-profit 'education mentoring organisation' that teaches people how to trade stock options. The firm's marketing is filled with similar quotes from former students, all praising the programme and talking about the money they made trading options.

This is not about slowly accumulating a diversified portfolio on fundamentals-driven analysis, for long-term compounded returns of, say, 5 to 6 per cent per year. This programme is about outsmarting the market, which the pamphlet advises is 'one big game'. The seminar targets a common ambition among investors: to make money through active trading.

Wealth Mentors, active in Hong Kong since 2006, takes things a step further by advocating the leveraged trade of equity options, a derivative involving fairly advanced maths and trading strategies.

Options give investors the right to buy or sell a given security at a preset price (also known as the strike price). Options are tricky in that an investor is taking a view not just on the direction of the trading price of a certain security, but on the volatility at which it trades. Options typically only pay out if the volatility is high, sending the security past the strike price. They are also risky in that they often expire worthless. There is an all-or-nothing aspect to the payout.

Options trading courses are common in the region. Some, such as the Hong Kong Securities Institute, give courses aimed at professional traders. But others, such as Singapore-based PowerUp Capital and AchieverLife, use similar marketing techniques to Wealth Mentors. They also feature glowing testimonials and a charismatic leader.

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