Are There Any Successful Option Buyers ?

[Chubbly]

May I ask how do you determine/know your profit target/potential is 80% vs 100% when you enter a trade? I appreciate your advice.

Another comment: It is very difficult day in and day out to sustain a bunch of losses and not give up or got wipe out. For me, a few wins were able to cover all the losses but it sure is depressing most of the time, so I am looking for a way not to take all these losses. Perhaps those that said selling was a better way to go made a good point, at least psychologically.

Well I can tell you there were lots of option sellers who sold Puts near the 2000 mark who had a lot of anxiety when it dipped into the low 1800's probably a lot who bailed on positions.

 

[newwurldmn]

But, but, but, I am looking at it purely from a return on investment point of view. To the economists and financial gurus you are correct, to me though, intuitively the only thing that matters is how much I get back for what I put in (cost of the long options) on an annualized basis? Otherwise, how else should I treat my investment?

Regards,

Because an option is an inherently leveraged product. Looking at the returns compared to the option value is like looking at the returns of an ES future based on margin requirements.

In your world, if you sell an option, does that mean your return is 100%?

 

[ironchef]

Because an option is an inherently leveraged product. Looking at the returns compared to the option value is like looking at the returns of an ES future based on margin requirements.

In your world, if you sell an option, does that mean your return is 100%?

No because in my world, the broker only allows me to do "buy-write" or covered calls. So, my return at settlement will be gain/(cost of shares - proceeds of selling call options).

For you pros, the return is the negative of those on the other side of the trade: the buyer of options? i.e., in aggregate if as a buyer I lost $x, my counterpart on the sell side should gain $x, (both ignoring commissions and slippage)?

If I am wrong, please correct me.

Thanks.

 

[ironchef]

Well I can tell you there were lots of option sellers who sold Puts near the 2000 mark who had a lot of anxiety when it dipped into the low 1800's probably a lot who bailed on positions.

You are telling me the grass seemed greener on the other side of the fence but is actually not.

Perhaps the best position is be a market maker. But then rmorse will tell me it is not as good as it seems to be a market maker.

Thanks for the comments.

 

[ironchef]

I don't want to speak for OptionGuru, but here is how i look at it.

You get your target from your chart of the underlying instrument. Say you see IWM trading down hard into a daily support that just happens to be a 2nd HL. The premium is going to be decreasing as the emotion of the move down is playing out. You're trying to catch the falling knife, betting the support holds and you get a short term squeeze up. If this is happening on Wednesday or Thursday all the better. If it works, you can make 100% or better on the SS without the risking getting stopped trading the TF or IWM outright.

Your stop is the premium you paid to participate.

Thanks for the coaching. What is IWM, HL and SS and TF?

Regards,

 

[newwurldmn]

No because in my world, the broker only allows me to do "buy-write" or covered calls. So, my return at settlement will be gain/(cost of shares - proceeds of selling call options).

For you pros, the return is the negative of those on the other side of the trade: the buyer of options? i.e., in aggregate if as a buyer I lost $x, my counterpart on the sell side should gain $x, (both ignoring commissions and slippage)?

If I am wrong, please correct me.

Thanks.

Exactly, you should look at the return of selling a put as the same as buywriting.

 

[WildBill]

Thanks for the coaching. What is IWM, HL and SS and TF?

Regards,

HL = Higher Low
IWM = ETF that mimics the Russell 2000, Trade the ETF outright or with options
TF = Russell 2K
SS = Short Squeeze

 

[kcgoogler]

IMO .......... 80% profit target isn't enough for a long option position - profit target should be 100%.

rotfl

Good advice. Yes yes; 100% is the perfect number - 80%... blaahhh