absolutely not true.
tl;dr: more work = more profit. put in work. more risk = more profit. don't be a bitch.
i'm going to speak specifically only on stocks first, then derivatives.
the efficient market hypothesis is widely accepted to be true: statistically, there is no possible way an individual investor who hand-selects their portfolio/individual stocks to adequately gain a return that consistently beats the market average, or a broad-based market index. 'Random-walkers' take it one step further and state that a [pseudo]random selection of blue-chip stocks would be equal to, if not beat the market over the long term. literally blindfold someone and shoot darts at current top choices (ex. AAPL, GOOG, BKB).
well here's this really good book that i recommend reading:
http://www.amazon.com/Common-Stocks-...dp/0471445509/ One of my favorite investment books to have read, beating Malkiel's 'A Random Walk Down Wall Street' and Gharham's 'The Intelligent Investor'. All of these books are good too.
Anyway to summarize: There's way to beat the average which take a lot of time and effort in doing so. I think you have to have a very good understanding of current socioeconomic policies, and a little bit of math, in order to be a good equity investor. It's possible and it can be done. I've actually got a perfect example of this since my own portfolio has a perfect side-by-side comparisons of a 'passive' strategy vs an 'active' strategy (i quote 'active' because to me, now, trading derivatives, it is BARELY active):
passive, passive, active
10,18,44% return respectively based on activity. 2013 was the same (beat the market by 2%, hard as fuck since the S&P gained 32% that year, and 2012 i started in july so i had nothing to report then but my initial loss of 10%).
I really recommend reading dem books thou
now, what this basically equates to is more risk = more possible return/loss. so this is where derivatives come into play.
there's two types of stock option derivatives (sticking to this for now to keep it simple, keeping futures and swaps out of this) which are directional or non-directional plays. with stocks, really, everyone is directional one way: up. you hope the underlying you bought goes UP from where you originally bought it. that's simple.
a directional option play means basically you're hoping the stock goes in the direction you want it to go, based on the type of option you bought. whether it's a long call, long put, short call, or short put. what it basically means is that you want the underlying to go the way you want (a direction), otherwise your option contract becomes worthless. AND IF YOU'RE NOT CAREFUL, there's this thing called theta or 'time decay' which might make your option contract worth even less over time.
now, non-directional plays pretty much mean you could care less which way the underlying moves, as long as it does what you want it to do, whether that's moving A LOT, or not moving at all. delta measures the price of the option contract as the underlying moves +/- 1 point. directional plays are delta-heavy. non-directional plays are delta-neutral.
so, i mean, it's not a very difficult concept to grasp right? ok good. now let's move on to vega.
vega is the $ amount value of an underlying assets volatility, or sensitivity to change. meaning if you had a position that benefits from positive vega, or a position that benefits from volatility, then the value of your option contract goes up. if you have a position that benefits from a decrease in volatility, then you're considered positive theta. bear with me on this.
an underlying asset that has high volatility usually means it's unstable or uncertain, or can possible swing many standard deviations away from its (the underlying's mean). remember how i mention we use black-scholes to calculate the value of an option? well you can also make constants and derive a 'rank' in which you can measure an underlying's current volatility with it's historical volatility and come up with a conclusion of its implied (or future) volatility. more investors need to trade implied volatility. why?
well honestly there's a lot of complicated math in this, more than the math that's already taken place from the things i mentioned above, but to [again] put it tersely: implied volatility is always overpriced - always. funds will always hedge there positions away from risk (i.e volality). there isn't a possibility to have a position that benefits from a decrease in implied volatility because there are already too many people doing so. what we can do then is benefit from non-directional positions that are overpriced via theta.
theta is defined as the price of the option contract as time moves. option contracts are set at a future date. as the date gets closer and closer, you option contract loses value exponentially (if you have negative theta). delta positive positions are always negative theta.
time-decay, and accelerate theta decay is constant. we like constants. constants mean guaranteed profit. so in order to capture the benefits from theta decay, you need a an option contract that is either delta-negative (puts) or delta-neutral (straddles, strangles, Iron Condors).
so first you must start with a position that is overpriced (high volatility) and make a position that captures the positive theta. you can do this with risk defined trades like iron condors, or undefined risk trades like short straddles or short strangles. 'undefined' risk trades mean that, if the trade goes against you and the underlying actually moves past your legs, your contract can get called away and you might owe..big time. im' talking you were hoping to make a credit profit of $200 and now you owe $3500.
so why would i even recommend this strategy? well, another constant is probability. there are ways to offset your risk by increasing the legs of your short trades to areas of probability that
won't touch....but at a cost of your contract premium. so you have to balance between making a larger profit and losing most of the time, or a smaller profit but more winners. ex: a 70% chance of make $30 over multiple instances are statistically more beneficial that trades that have a 30% chance of making $70 over the same amount of instances. and thanks to options being leveraging machines, you save your precious precious capital and can (statistically) always cover your losses. which are like 1/20 trades if you're doing it right.