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

[M.W.]

I am willing to bet that you don't see an edge in any asset class I would throw at you. That has zero bearing on that asset class as being impossible to develop an edge in trading. It just means that you don't have yet found an edge. I know several guys who trade index options profitably by taking advantage of temporary mispricing of skew and/or volatility. But those guys are well versed in mathematics and probabilities and have find tuned their models over years and all of them have a professional trading background. I developed an edge in systematic cash currency trading. I trade longer timeframes purely based on macro sentiment, such as fundamental shifts in central bank interest rate setting or shifts in economic performance. I don't even care about daily performance. I care about quarterly results at the most micro level.

Not that hard at all if you don't take away your best weapon...TIME. Probably 99% or all trades that have ever been closed at a loss could have later been closed at a profit. With futures you are faced with carry over fees, interest with forex etc. Options you have an expiry and time decay. I doubt even 10% of options traders actually make more money than a regular minimum wage job trading purely options. I would go so far to say that less than 1% of traders can eek out a living purely on options. Bottom line if you don't have enough capital to manipulate price action to your favor (market makers) then you are along for the ride. This is fine if you are buying stocks with cash, you just wait it out, or even average down, but if you are on margin, or playing options then you are an easy target.

Rule number one of trading. "Know who you are trading against".

So again I am waiting. Prove me wrong.

 

[M.W.]

That is nonsense. If you were directionally correct I can show you over thousands of call and put positions that turn out profitable. In fact probably tens of thousands. Getting direction correct is actually the hardest thing in options trading which is why so few base their edge on direction of the underlying. There are much lower hanging fruit to pick.

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.

 

[newwurldmn]

With short term vol at 10, it’s a no brainer to be long calls.

Full disclosure, backtesting,not doing..

Buying calls..
Have to go back and check to see if I used a stop

 

[Windlesham1]

Obviously I'm trading indexes. Anything with daily expiries.

And there's your problem- 0DTEs are a casino. I trade anything up to 6 months hence. You will not make money with short term options trades. That is my experience, though I've had fluke trades that have made serious coin within a few days. Don't despair, it takes time.

 

[newwurldmn]

And there's your problem- 0DTEs are a casino. I trade anything up to 6 months hence. You will not make money with short term options trades. That is my experience, though I've had fluke trades that have made serious coin within a few days. Don't despair, it takes time.

he’s profitable trading 0dte options. But options traders can’t be profitable.

The OP is a moron.

(I’m hoping this post gets more likes than his entire career on this site).

 

[taowave]

Premium strategies???

WtF???

Did you come up with that one on your own??

You guys aren't making crap vol trading. The risk reward is garbage so no way its sustainable. I am still waiting for one example. I simply posted that all these premium strategies are much ado about nothing. As I heard someone else say its like picking up a penny in front of a steam roller.

 

[wxytrader]

Premium strategies???

WtF???

Did you come up with that one on your own??

Do you even trade? You don't sound like you understand basic terms.

 

[wxytrader]

he’s profitable trading 0dte options. But options traders can’t be profitable.

The OP is a moron.

(I’m hoping this post gets more likes than his entire career on this site).

Yes I have mentioned that for all the bad press 0-3 dte's get they are actually the better choice versus longer expiry longs, and don't get me started on credit spreads. As long as you have tight risk management and don't mind trading every day.

 

[wxytrader]

And there's your problem- 0DTEs are a casino. I trade anything up to 6 months hence. You will not make money with short term options trades. That is my experience, though I've had fluke trades that have made serious coin within a few days. Don't despair, it takes time.

It's more like passing a hot potato than a casino. Give me an example of a 6 month option that you think count be profitable.

 

[wxytrader]

That is nonsense. If you were directionally correct I can show you over thousands of call and put positions that turn out profitable. In fact probably tens of thousands. Getting direction correct is actually the hardest thing in options trading which is why so few base their edge on direction of the underlying. There are much lower hanging fruit to pick.

If you go long an option, right away you are down the spread, down the premium, down the fees, and the clock has started ticking on your time decay. You not only need to get the direction right, you need the stock to move in that direction without lingering. That doesn't sound like an edge to me on a consistent basis. Perhaps your math guys should review some basic addition and subtraction.

Direction is not hard at all...it's just using statistics in you favour. The problem with options is you may get a double correction sometimes so you can run out of time for reasons mentioned above.

I saw somewhere that the premium calcs err on the high side of probability of price movement, and that statistically price does not generally move to those levels yet you are paying the price for the potential of that move.

Anyway my point being if you wait for the volatility to come in you are essentially already priced out of any reasonable chance of profits...BUT if you can get in before volatility comes in then THAT could be an edge I grant you that. What can you go by...bollinger bands? I mean yes volatility squeezes and expect an expansion...but how long will it squeeze right?