advantage to selling options?

[TheBigShort]

The stock drops to 70 and you collect the premium ($$).
Then you find another stock with no upside potential and rinse and repeat.

lol

 

[destriero]

What, you don't know that yet, Mister big shot millionaire who loves to brag and is afraid of losing his precious bitcoins?

Here, learn my friend:
https://www.moneyshow.com/articles/optionsidea-42955/

Options writers also make money because the Black-Scholes model is flawed.

You don't know?

How does BSM favor sellers?

 

[Tradex]

lol

I suggest you read a few books on how to earn an income selling covered calls, you obviously do not have a clue on how the pros earn a living with this type of strategy,

 

[destriero]

lol

traderrrrx clearly outlined the option theory which shows the three distinct ways you make the monies by writing opshuns. You dumb.

 

[destriero]

@Tradex: how do option writers have the advantage due to the flaws in BSM?

 

[Tradex]

You don't know?

How does BSM favor sellers?

Seriously, are you stupid or just drunk/high (or both)?

If the value of an option is not calculated correctly (due to faulty assumptions), that means that the options buyers overpay for these call/put options.

And if they are overpaying, guess who is profiting from that situation?
The options sellers.

Get it now, "hot shot"?

No?

Never mind.

 

[destriero]

Seriously, are you stupid or just drunk/high (or both)?

If the value of an option is not calculated correctly (due to faulty assumptions), that means that the options buyers overpay for these buy/calls options.

And if they are overpaying, guess who is profiting from that situation?
The options sellers.

Get it now,hot shot?

No?

Never mind.

The vol-figure is implied by the premium. Why wouldn't they underpay? Why would buyers overpay?

You mean like paying 40% vol for the 100 call instead of 30% vol for the 100 put?

 

[BlueWaterSailor]

I never understood the methodology of selling calls on single names...you do a lot of research to find a stock that has a lot of upside potential and then you cap it?

You are also forgetting about the scenario where:
You buy a stock at 100 and sell the 105 call.
The stock drops to 70 and then you sell the 75 call.
The stock rallies to 120 and you had to give the stock away for 75.

How is that steady income? That is a big loss

Hey, TBS - good to see you! I've been away from ET for a bit, nice to see you're still here.

Regarding the above, that's where skill comes in; simple, trivial actions are rarely going to make you money when a problem happens. For one, if that stock drops to 70, the vol on it is going to spike - at which point, selling the 75 call wouldn't make any sense. The delta would be way too high... but also, the calls farther up would have some good juice to them. I'd probably sell one that was at 105 or 100 as well as further out.

In fact, this is exactly what happened with ROKU in my journal... I was down over $5k on it at one point, but due to the high vol on it, I was able to work it back up and close for a small profit.

But overall, I agree with both you and @newwurldmn - there's no easy, obvious, "dumb" way to make money no matter which side of the options (or investment of any sort) you take.

 

[destriero]

Hey, TBS - good to see you! I've been away from ET for a bit, nice to see you're still here.

Regarding the above, that's where skill comes in; simple, trivial actions are rarely going to make you money when a problem happens. For one, if that stock drops to 70, the vol on it is going to spike - at which point, selling the 75 call wouldn't make any sense. The delta would be way too high... but also, the calls farther up would have some good juice to them. I'd probably sell one that was at 105 or 100 as well as further out.

In fact, this is exactly what happened with ROKU in my journal... I was down over $5k on it at one point, but due to the high vol on it, I was able to work it back up and close for a small profit.

But overall, I agree with both you and @newwurldmn - there's no easy, obvious, "dumb" way to make money no matter which side of the options (or investment of any sort) you take.

Vol trades inverse to price, generally, and certainly in tech. Price the same strike put against the CC. Say the shares are trading 115 and I sell the 120C at 14. The put is trading at 19. Weeks pass and ROKU is trading 70. The 120P is trading at 50 1/4. You're down 31 and change on your combination (covered call). Where is the juice? Sure, you're not shorting the 120C which is now 50 points OTM, but vomma is small in OTM options. What's 10 more on the vol-line on a 20D call in ROKU? $0.30?

There are no repair strategies. Yes, you're going to replicate the position at a higher vol-line, but you're out $30/share.

 

[Tradex]

The vol-figure is implied by the premium. Why wouldn't they underpay? Why would buyers overpay?

You mean like paying 40% vol for the 100 call instead of 30% vol for the 100 put?

NO!

It means that the BSM has been designed to produce options that are priced higher than they ought to be, just like a roulette at the casino has been designed to pay you less than the true mathematical odds.

Enough said.