it's called a hedge
In or Out of the Money
- Thread starter BoneFishGA
- Start date
Why?
Quote from BoneFishGA:
I like the leverage part.
That's what draws most option virgins into the options game. Lottery ticket mentality. Yet MOST lose money buying OTM options. I'm speaking from experience. I lost more cash buying OTM calls than any other "strategy" I've tried.
I still trade options (profitably) but here is the difference between then and now. When I scan an option chain to open a position I never look at the option "price" column any more, I scan down the "Delta" column first. And of course liquidity goes without saying.
PS: By "scan" I mean visually, the old fashioned way.
Too many iron condors guys? Plain basic hedge against a big move like long spot plus OTM put as crash protection. I think thatâs why they were invented in the first place: not to speculate a big move, but to protect against one.
Unless you one of the few with special talent, buying cheap OTM options is a losing game. Newbies are attracted to it because of the potential for a quick hit. Unfortunately, that hit is usually on them.I like the leverage part.
I bought some cheap options a couple of times purely for speculation, but thats the extent of my options experience.
I'm starting to look into other strategies now
They're more suited as throwaway money when hedging something that has the potential to make more in the center - moderate movement away from strike(s) sold.
Well you are not simply buying OTM options you are selling OTM spreads, big difference and not the same strat
. Trying to be wry but it just confuses those who do not understand what you mean... 
Right. And illegal aliens are undocumented immigrants.