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

[earth_imperator]

All you need are trades with these characteristics:
1) pWin >= 0.5 (the more the better; of course this can theoretically go up to 1.0)
2) reward >= risk
The art is to determine these factors for "the most probable area" on the scale
(ie. the area around the initial underlying spot on the x-axis) --> expectancy.
IMO a good choice is taking the abs pct dist of -1SD (or upto -2SD) also for the other side (this is very unintuitive/unusual).

Of course also important:
3) know that at expiration, IV and volume are irrelevant...
4) risking only 1% to max 5% of AUM per such trade (ie. need to have about 20 to 100 such trades at the same time for being fully invested).
5) use spreads or spread-like constructs (ie. where loss is capped); if early assigned, just let it be, don't fight it with stops etc

...based on research/study/sims, not yet real-world tested.

 

[themickey]

You are trying to use all this fancy lingo to somehow convince people that you know what you are talking about. Convex, concave for instance is just a slope showing the intensity of the move...concave rising slope is still increasing price but with less intensity than a rising price with a convex slope. THAT is essentially what the RSI does. It will show a stock increasing at a decreasing rate of change.

Who? Confidence? I have basically come to a forum that is supposed to be home to some of the most Elite traders and schooled them.

No. RSI is a very deceptive indicator, it has no edge, most likely taking you out of a trade just as the position begins a big run.

 

[Sergio123]

People I know who trade options successfully are not talking about “premium”, covered calls, punting 0dte, etc., they’re talking about buying on credit/debit, convexity/concavity of the trade, the term structure of vol, long or short gamma, charm, etc.

They are still just buying and selling shares, calls, and puts. That's all that there is.

The additional terminology is just marketing to sell additional products to people who don't need them.

All that you need is good understanding of option pricing models and probability distributions.

 

[longandshort]

Yes they are looking at the probability of profit and confirming a change in the rate of change/slope using the rsi...all wordiness to look smart.

Is this a joke? The probability of a profit indicator is useless, as is rsi lol, no one uses them. You’re still learning and at this point know much less than a 16yr old floor clerk interning with a local.

If you look at an atm option today it’s priced at 50d. If you have a view on the stock then to you a 25d strike is cheap.

If you’re trading vol then the structure of vol through time, such as an atm strike today, tomorrow, day after, etc., changes. This can be exploited.

If you’re trading index vol then term structure of vol futures also changes due to basis, positioning, etc. which can also be exploited.

In fact, there are many opportunities within options to exploit. Are they easy to? No.

 

[longandshort]

They are still just buying and selling shares, calls, and puts. That's all that there is.

The additional terminology is just marketing to sell additional products to people who don't need them.

All that you need is good understanding of option pricing models and probability distributions.

Yes we are all just vibrations of strings in the 10th dimension. That does not mean knowing the difference between a mountain and a landing strip is useless.

 

[TheDawn]

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.

Have you actually done any real trading options or you are just analyzing atm? And can you show us some concrete strategies that you have looked at and show us what in those strategies make you think will cause "maximum pain to everybody"? Perhaps there is something that we can help you with? Many of us here have been profitable or even very profitable trading options, just to let you know.

 

[M.W.]

I don't know much about Stan other than this one book of his. I found the book more useful as introductory read than most other books on financial trading geared towards beginners. It teaches more about the psychology of markets than all the other crap that is out there (again, filtering out the content geared towards newcomers). Our prop group focused on longer term macro based plays across various asset classes. Though we also had a team of index options traders who made over 80 million in Asia alone until the house burned down in October 2008. Then a convertible bond guy, a very seasoned fx trader and a treasury trader. I managed the exotics book and traded correlations having come fresh out of grad school. I liked Stan's book, it wasn't too bad. I was referring to hubris as the hubris exercised by top management that had destroyed the bank that existed for over 110 years.

4 stages off hubris!! Well said,Stan is a bit full of himself

 

[taowave]

Wilders RSI and Skew in the same sentence??

In what world???

Wait,my bad,you must mean Relative Skew Index..

I knew you weren't that dumb

 

[wxytrader]

No. RSI is a very deceptive indicator, it has no edge, most likely taking you out of a trade just as the position begins a big run.

The rsi is basically your concave/convex slope and deteriorating rate of change indicator among other indicators like rate of change. Divergence of the rsi widely used...and understood. I'm not saying I trade off it but will use it to confirm my directional bias along with other things of course. Nothing takes me out of a trade...I would hedge instead.

 

[newwurldmn]

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).

wohoo. Another post that beats the OP’s lifetime likes.