Is buying naked calls a stupid way of being long?

[athlonmank8]

If someone doesn't know how to trade and doesn't have an edge yes. This is extremely stupid.

Your P&L is the gauge plain and simple. No one can tell you yes or no to this.

 

[taowave]

I dont think you got my point..
I was basically saying that anytime vol explodes after a hard down move in the market,should the market rebound the implied vols get destroyed..

Odds are if you are long vega you will be facing a major battle to overcome the contraction in vol..

The best example is the day after the 87 crash when the market exploded almost every option on the board was down...

Quote from macrotrader:

There is no golden rule that says if VIX > 30 than VIX will rise. Have a look at April-May 2010, September-October 2008, etc. Sometimes it takes years until the VIX falls to it's long-term average.

 

[cdowis]

Quote from LeeD:

1. You need a substantial price move in your favour before you start making any money by executing an option.
2. Option price is primarily determined by volatility. So, you buy options in expectation of volatility increase. Volatility fell in the last 2 weeks. Hence options fell in value.

Options also loose value as they approach expiration.

Conclusion: If you want to express view on a stock price and not volatility, it's better to go long or short actual shares, not options [/B]

You don't know what you are talking about. You can structure an option position that addresses these issues:

Read my post in this thread http://www.elitetrader.com/vb/showthread.php?s=&threadid=200040

 

[masonyes]

What about purchasing LEAPS Out of the money with the intent of the call being ITM within the long-term time frame of the option? Time decay is less of concern, right?

 

[spindr0]

Quote from jr07:

Is buying calls instead of the stocks themselves a stupid way of being long? I was under the impression there would be some benefit in being able to put fewer money to work for more quantity of stock, kind of like having greater margin....

It's not stupid if it makes money for you

 

[dagnyt]

Quote from jr07:

Hi,

I thought buying calls of stocks I am bullish on was a good way of leveraging a long only strategy

However, I have noted that

1. the spreads on the calls are so large that as soon as you have entered you are already losing money and

2. the calls loose value extremely fast, specially in weeks like the past two.

Is buying calls instead of the stocks themselves a stupid way of being long? I was under the impression there would be some benefit in being able to put fewer money to work for more quantity of stock, kind of like having greater margin....


J

1) You are buying the wrong calls. Do not buy OTM options.

2) Consider calls as a stock substitute. If you must buy options, then consider buying ITM options with a delta in the 70 - 80 range.

The time premium is small and you do well if your bullish prediction is correct.

There are better strategies than call buying, but if that's what you want to do, give yourself a chance to win.

Mark
http://blog.mdwoptions.com

 

[Cdntrader]

Quote from livevol_ophir:

Yes. Options are vol first, delta second. Also, don't pay NBBO, put a limit for something at least a little better. And please don't <i>ever</i> use a market order.

When a market order comes into the floor through a broker, we literally laugh about it. Even the announcing broker gets embarrassed.

When you trade an option you are trading vol, whether you know it or not, that's your position.

lol floor. He said floor!


Dude what year are you living in?