No, have no fear. You won't regret biting. Besides, I'm not as confrontational as some of the posters here. I believe everyone's entitled to their opinion. But I've traded options for more than 5 years. It's how I started. Wasn't much of a choice really. back some 14 years ago, if you only had $3k to $5k and you wanted to play in the markets, that was the way to go. I started with stock options then moved to the OEX.
I know... lol... my grammar is atrocious during the trading day. Anyway, on the whole, options are far riskier for the "spreadless" buyer than futures are. It's one of those established facts. And to add a note about real world risk management, during 9/11, had I been on the wrong side, I knew pretty much what my risk was sans minor slippage in the E-minis. Straight buyer of an OEX option or whatever knows their risk too. The money they put down on the option.
Mmm... you could say that your analogy is incompatible. If one is a buyer of options, like our bud who started this thread, I am assuming that he's doing so in the hopes of capitalizing on the move in the underlying without regard to using a spread. Therefore, he has to worry about the rate in which the move occurs in the underlying. While he might be right on direct, he could be wrong on magnitude which could leave his options veritably worthless long before expiration. Or he could suffer a quick 50 - 70% loss as the option goes from being in-at-out of the money. I remember those times all to well.
All true, but no with the same ease as with futures.
True again, but your defined risk usually implies defined reward. AKA, limited reward. Our buddy here who started this thread seems to be interested in being able to apply the adage " cut your losses and let your profits run." Not that he can't do that with options. But he might have trouble doing that as the option goes deep in the money. At that point liquidity dries up and he might not be able to get out at the last price depending on his size.
LEAPS are relatively illiquid. While in theory you could hold leaps for a long time, how many "players" actually do? Not many given their delta. *which can sometimes be hard to calculate given that fact that many leaps are illiquid.
OEX is one of those tight markets along with some high market cap stocks.
That's great stuff. Really. Back when I started out with options, the software for real time position management just wasn't there or way out of my price range. So only the simplest of spreads were useable. Today however, there's much available at reasonable prices. But then again, many traders aren't going to take the time to learn all that. It's sort of a steep learning curve. So most traders use options in a linear fashion. Buy calls when they think they're going up. Sell puts when they think it's going down. And statistics have it that option buyers blow out much, much sooner than futures players do.
I love writing options. More often than not, it's free money. But the linearity of futures suits my trading style and I think it would suit the trading style of the poster who started this thread. Hate to see new guys blow out using the wrong instrument for their style and mindset. Especially when they have a choice. One of which didn't exist more than a decade ago when I started.
