Are options a waste of time and money? (pun intended)

wxytrader said:
Show me an example. Yes we all understand that IV dictates price but collecting the premium is just the beginning. You have to actually keep the premium.

Seinfeld said it best:

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Tip: know (calc) the reward/risk ratio (or expectancy) in advance, before entering the trade... It should be better than 50:50, ie. reward should be >= risk... Try Call spreads w/ HiIV... 'nuf said... :)
 
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earth_imperator said:
Tip: know (calc) the reward/risk ratio (or expectancy) in advance, before entering the trade... It should be better than 50:50, ie. reward should be >= risk... Try Call spreads w/ HiIV... 'nuf said... :)
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Did you not read my first post? Where did I say I was entering a trade? I was calculating everything on tos and nothing looked profitable even if directionally correct.

Really, every road leads back to 0-3 DTE long options because imo they yield the best risk reward as long as you manage risk properly. Any duration play like credit spreads, Iron condors, butterflys etc look like complete garbage, and I question anybody is actually profitable long term trying to implement them. The farther out the expiry the more premium will kill your position... Long leaps might be ok if you just want to hold but the spread is horrible...

Ie a call spread with high IV means you get a good price, but there is a higher probability that your short option ends up ITM and you get wrecked by assignment risk. Sure you can set a stop but good luck after hours...and a stop order becomes a market order so who knows what cost you get out at during a dump intraday.
 
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@wxytrader, I admit I'm still in my own learning-curve, I'm only quoting just my recent (unfinished yet) research/study results...
Cf. the example link in prev posting. And know your CostBasis, ie. how much you invest (this can be different from the risked value, depending on the construct).
 
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wxytrader said:
Ie a call spread with high IV means you get a good price, but there is a higher probability that your short option ends up ITM and you get wrecked by assignment risk. Sure you can set a stop but good luck after hours...and a stop order becomes a market order so who knows what cost you get out at during a dump intraday.
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No need for stops as spreads have a certain guarantee... :) It holds even after a possible early assignment...
 
wxytrader said:
I have been looking at different option strategies, but none of them seem to have a reasonable chance of making any consistent profits once you factor in risk reward, premiums paid and time decay. Everything is priced to basically cause maximum pain to everybody.

The strategies I was analyzing were Singles, spreads, iron condors, butterflys.

Prove me wrong.
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There is consistent profitable strategy on options with Sharpe 3. I also published it here with the scientific study together in the past. Again the study here attached. Study that in detail. You can make here something like 5% monthly consistently. Cheers.
 

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You should be asking if options offer any advantage to trading the underlying..

By and large,I agree with what you are saying,in particular 0-3 day options.Its the only "strategy " I have backtested that significantly outperforms...

Fwiw,Tos would not be my backtesting tool of choice. Look at Orats..






wxytrader said:
Did you not read my first post? Where did I say I was entering a trade? I was calculating everything on tos and nothing looked profitable even if directionally correct.

Really, every road leads back to 0-3 DTE long options because imo they yield the best risk reward as long as you manage risk properly. Any duration play like credit spreads, Iron condors, butterflys etc look like complete garbage, and I question anybody is actually profitable long term trying to implement them. The farther out the expiry the more premium will kill your position... Long leaps might be ok if you just want to hold but the spread is horrible...

Ie a call spread with high IV means you get a good price, but there is a higher probability that your short option ends up ITM and you get wrecked by assignment risk. Sure you can set a stop but good luck after hours...and a stop order becomes a market order so who knows what cost you get out at during a dump intraday.
More...
 
taowave said:
You should be asking if options offer any advantage to trading the underlying..

By and large,I agree with what you are saying,in particular 0-3 day options.Its the only "strategy " I have backtested that significantly outperforms...

Fwiw,Tos would not be my backtesting tool of choice. Look at Orats..
More...

what are you doing in 0-3 day options that outperforms?
 
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