Do Option Sellers Have a Trading Edge?

[xelite777]

Oh, bottom line. wtf didn't you say that in the first place?

Just for having the pleasure of seeing post you another meaningless comment.

 

[drownpruf]

Bottom line, as far as option trading is concerned, it's better to be on the seller side than on the buyer side, as the odds clearly favor the sellers (writers).

However, if used properly and under the right circonstances, buying put or call options AND buying/shorting/holding the underlying financial instrument at the same time can also create some terrific trading opportunities.

What circonstances are those? Some exomplez please?

 

[xelite777]

What circonstances are those? Some exomplez please?

Trade secret, sorry.

It has to do with volatility, one of the key element in option pricing.

 

[Martinghoul]

http://www.investopedia.com/articles/optioninvestor/03/100103.asp

From the article:
"The three-year averages of exercised options (in the money) versus options expiring worthless (out of the money) for the markets examined below confirm what the overall findings indicate: a bias in favor of option sellers"

Oh, not this again...

 

[stock777]

lol

 

[FXforex]

Q: Do Option Sellers Have a Trading Edge?

A: The only edge would be the time decay.

Also IV potentially.

!!! NO !!!

IV is no edge/advantage for the seller.

 

[TskTsk]

The mathematical assumption behind the famous (or should we say infamous) Black Scholes model is completely flawed, you should know that by now.

In fact, and it's one of the best kept secrets, only the option brokers/sellers know the REAL value of an option. I even read somewhere that the true value of an option must not be revealed to anyone outside of the brokerage option house, for obvious reasons. Nothing illegal about that practice though.

http://voices.yahoo.com/9-important-flaws-black-scholes-pricing-model-11979528.html?cat=3

LOLWAT

Man I love all these conspiracies people present. Only brokerages know the "REAL" value huh?

 

[paladinhgwt]

LOLWAT

Man I love all these conspiracies people present. Only brokerages know the "REAL" value huh?

Yes one of the secrets of the world that have never been divulged to the general public... the REAL values of options, the formula for Coke a Cola, oh and of course aliens over Roswell.

 

[neke]

Q: Do Option Sellers Have a Trading Edge?

A: The only edge would be the time decay.

Time decay is not an edge. It is the reward for bearing the risk of a sharp move against you. Over the long run it balances out.

 

[DR.BOUYE]

http://www.investopedia.com/articles/optioninvestor/03/100103.asp

From the article:
"The three-year averages of exercised options (in the money) versus options expiring worthless (out of the money) for the markets examined below confirm what the overall findings indicate: a bias in favor of option sellers"

Understanding and being comfortable with the associated risk holds greater pertinence in this matter, and not the assumption of inherent edge.