I have a loss of 1.400% by

[optgamvol]

but before quoting your ONLY educational literature that you seem to own, you better read more carefully:

Hull was referring to deep-out-of-the-money options. In that light his statement makes complete sense, as you pick up only small premiums however, as I already mentioned, extreme outcomes are statistically not correctly reflected in most distributions, meaning that especially the premiums of out-of-the-money options ought to be higher than they are.

BTW, should you know a bit more about Hull than just what whas written about him in Market Wizards (what makes this book so popular here at ET, is it because its the No. 1 book for daydreamers?) you should know that Hull made a huge chunk of his money, selling options and earning premiums. Its not a suckers game, believe me.

Quote from heilbronner:

Blair Hull: "I was consistently making money, but that kind of strategy - selling deep out of the money options - only leads to consistent profits until a catastrophe arises."

 

[heilbronner]

Quote from wwatson1:

I am short 40 call's on RMBS 3 days to expire worthless and this happens (those of you who havent seen the premarket trade price on RMBS it's up 41% already!).

Rmbs trade done. Covered with a gain of 66.6% within a short time.

Once again: Thanks a lot.

 

[lindq]

Quote from bbmat:

but before quoting your ONLY educational literature that you seem to own, you better read more carefully:
Its not a suckers game, believe me.

I always find it easy to identify posts by someone who has actually traded a strategy - such as short options - from those who have simply studied it and think they have the answers.

In your case, if you had actually traded short options on a regular basis for any length of time in various market conditions (as in, more than 2 weeks), you would be much less likely to be so supportive of such a suckers game.

I will state without any hesitation - and with considerable experience - that anyone who is skilled enough to even break even in selling premium will do much better, with far less risk, in simply trading the underlying stock.

 

[heilbronner]

Quote from bbmat:

but before quoting your ONLY educational literature that you seem to own, you better read more carefully:

Hull was referring to deep-out-of-the-money options. In that light his statement makes complete sense, as you pick up only small premiums however, as I already mentioned, extreme outcomes are statistically not correctly reflected in most distributions, meaning that especially the premiums of out-of-the-money options ought to be higher than they are.

BTW, should you know a bit more about Hull than just what whas written about him in Market Wizards (what makes this book so popular here at ET, is it because its the No. 1 book for daydreamers?) you should know that Hull made a huge chunk of his money, selling options and earning premiums. Its not a suckers game, believe me.

Dear bbmat,

I would like to end the discussion with you, because:

1) You are clever and I'm stupid.
2) You have a high paid job at a top investment bank- I do not have.
3) You are graduate from a top US- university- I'm not.
4) You are making big bucks in the market- I keep on losing.
5)You have read that much books- I only have one.
6)You achieve everything- I'm a daydreamer.
7)Your are a winner- I'm a loser.

Adieu.

 

[optgamvol]

why not doing both, earning premium on short calls and owning the underlying? that way you clearly define your risk (which is not to be set equal to your trading risk of such position) and earn the premium. But you need deep pockets for that. This is one of many simple strategies that institutionals employ. In addition they lend their securities out to sec. lending dealers, which earns an additional couple basis points.

Well, I think I can say that because my desk sells thousands of options on worldwide interest rate products on a daily basis. And I have traded the short side for over 2 years now.

I just find it funny that some guys walk in here and only because they lost money utilizing this strategy (for one reason because they were naked the options position and got beaten in the village really badly) they conclude that this is a money losing proposition whereas its clearly proven that with proper risk management short option pos. have yielded a higher return over time than long pos. (on a portfolio basis).

Quote from lindq:

I always find it easy to identify posts by someone who has actually traded a strategy - such as short options - from those who have simply studied it and think they have the answers.

In your case, if you had actually traded short options on a regular basis for any length of time in various market conditions (as in, more than 2 weeks), you would be much less likely to be so supportive of such a suckers game.

I will state without any hesitation - and with considerable experience - that anyone who is skilled enough to even break even in selling premium will do much better, with far less risk, in simply trading the underlying stock.

 

[Virtuoso]

Quote from lindq:

I always find it easy to identify posts by someone who has actually traded a strategy - such as short options - from those who have simply studied it and think they have the answers.

In your case, if you had actually traded short options on a regular basis for any length of time in various market conditions (as in, more than 2 weeks), you would be much less likely to be so supportive of such a suckers game.

I will state without any hesitation - and with considerable experience - that anyone who is skilled enough to even break even in selling premium will do much better, with far less risk, in simply trading the underlying stock.

Lindq,

You do realize that their is someone on the other side of all those writes, right? I mean if selling premium is such a suckers game, then logic would say that buying premium would be a piece of cake, no?

As far as your prior post about you not going short at all, not even on the underlyings, would you mind elaborating on this a little? What is it about being short that you do not like or find uncomfortable?

 

[optgamvol]

you speak French which I don't ;-)

(besides that no need to stick your head in your a.... and becoming sarcastic; I just disagreed with your statements and proved them incorrect).

Quote from heilbronner:

Dear bbmat,

I would like to end the discussion with you, because:

1) You are clever and I'm stupid.
2) You have a high paid job at a top investment bank- I do not have.
3) You are graduate from a top US- university- I'm not.
4) You are making big bucks in the market- I keep on losing.
5)You have read that much books- I only have one.
6)You achieve everything- I'm a daydreamer.
7)Your are a winner- I'm a loser.

Adieu.

 

[lindq]

Quote from bbmat:

.....whereas its clearly proven that with proper risk management short option pos. have yielded a higher return over time than long pos. (on a portfolio basis).

If you are comparing short options to long options, neither is attractive to me.

But if you are saying here that short options are more profitable over time than long stock, that is complete crap. You must be falling for the B.S. put out by your own trading group.

 

[traderob]

Even with the flaming in this thread I am learning alot from everyone. Thanks!

 

[TheStudent]

... is a prime example of the arrogance of the house.

The house enjoys a considerable advantage in the markets raking in the vig when it makes markets on existing games (spread), introduces new games (underwriting fees) and entrance fees to play the games (brokerage fees). Employees of the house enjoy large bonuses with little risk.

Those who work at the house scorn the speculators at the table and think them stupid. To be fair, most of the speculators at the table are stupid. But that does not mean that once in a while, an Ed Thorpe might not show up to bankrupt the Blackjack table or a Doyne Farmer might not show up to bankrupt the Roulette wheel.

Corp Finance and Financial Mathematics are elegant topics of study that seem to capture the world and express them in a laboratory of dials and meters. But anyone who trades for a living, or who has run their own business for a living understands that the cut and thrust of players fighting against players is what determines prices and profits, and that any advantage of knowledge from study can be overwhelmed by weakness in character.