Any studies on who normally wins - option writer versus purchaser?

[ironchef]

I am grateful for those who purchase options. They help put my kids through school!

And they are grateful to you for making them rich.

Someone said both buyers and sellers can win.

 

[ironchef]

Are there any long term historic studies of this?

On the one hand, you hear that some large percentage of options expire worthless. Plus, it seems the option writer should be paid for letting the purchaser use leverage. Maybe there is a "cost to carry" that should be compensated.

on the other hand you have mutual funds that sell covered calls, and their performance is usually a goid bit sub par.

I know the above are not mutually exclusive. Just wondering if there is any long term analysis on this. Maybe on average writing versus buying is pretty much a push, which one might expect given I believe options are a zero sum game and assuming the market is efficient.

Thanks!

I posted this in a different thread:

I don't know, it seems like no matter what you sell your absolute performance is about the same as buy and hold? If that is the case, why go through the trouble, why not just buy and hold??

 

[sss12]

Not using margin. Not writing.

@Spectre2007
I also trade a long gamma strategy, although more of a swing time frame, overnight to 3 days. What size are those trades ? Are you trading delta or vol ? Thanks.

 

[sss12]

I posted this in a different thread:

View attachment 183128

I don't know, it seems like no matter what you sell your absolute performance is about the same as buy and hold? If that is the case, why go through the trouble, why not just buy and hold??

Ok, you have been posting and asking questions for some time...By now you should know that there is difference between trading and investing. Different risk reward profiles and different time frames.

 

[Spectre2007]

I use the indexes and underlying derivative/commodity look for correlations. I pick a support resistance and use momentum to signal trades. I have implicit feel for how the underlying is trading. It’s basically lottery positions, very small in nature. Even if I lost the money it wouldn’t bother me.

I can tell what the tendency is on a given day before it’s realized in the option pricing. Like if there is a underlying algo accumulating. So basically delta and vol.

 

[SoesWasBetter]

Be cool if someone would post these amazing trades as they happen, Maybe they do and I'm not looking in the right place. Help me out.

 

[lawrence-lugar]

if someone would post these amazing trades as they happen,
Maybe they do and I'm not looking in the right place

Help me out.

Keep dreaming, and searching, and studying -- and gain balls.
There is nothing supernatural or divine in the market...everything is there, for the taking.

No one likes a desperate beggar. -- The Lord helps those who help themselves.

If you want to become rich from the market...you can.
If you want to be average in the market...you can.
If you want to be poor in the market...you can.

 

[rtw]

Are there any long term historic studies of this?

On the one hand, you hear that some large percentage of options expire worthless. Plus, it seems the option writer should be paid for letting the purchaser use leverage. Maybe there is a "cost to carry" that should be compensated.

on the other hand you have mutual funds that sell covered calls, and their performance is usually a goid bit sub par.

I know the above are not mutually exclusive. Just wondering if there is any long term analysis on this. Maybe on average writing versus buying is pretty much a push, which one might expect given I believe options are a zero sum game and assuming the market is efficient.

Thanks!

this article here answers your original question, only put selling has superior returns to buying and holding in the age of stupid central banks inflating one stupid financial bubble larger than the previous one (this means those buying end with losses):

https://seekingalpha.com/article/528801-the-2-best-options-strategies-according-to-academia


mr. Butler at projectoption also shows that historically iron condors and selling puts have a very consistent positive expectancy (which means those on the opposite side end up with losses).

 

[rtw]

Be cool if someone would post these amazing trades as they happen, Maybe they do and I'm not looking in the right place. Help me out.

there's another trading forum i'm a member of and there is a thread about options on futures there where some traders do post the positions they open shortly after they have done so.

 

[ironchef]

Ok, you have been posting and asking questions for some time...By now you should know that there is difference between trading and investing. Different risk reward profiles and different time frames.

I am not trained in finance.

So, my question is why, on average, are traders doing all this work for no net gains?