Hi, the general consensus is that buying options, rather than selling, is a mugs game and that you lose with this strategy in the long run.
Is this really the case? If you buy deep in the money options with a high delta are you not then increasing your probability of success?
Interested to know if anyone here is consistently profitable just buying calls and puts? Thanks.
It may work only if you have years of experience, especially when developing a systematic strategy where you’ve tested specific way of trading and see for yourself whether something like this works, or find any other specific way of trading and don’t need to ask such questions.
When you do ask such question then you don’t have sufficient experience or a trading method that will work, especially for buying options. It is easier to make money selling options and even then you have to have a hedging strategy and/or some trading experience. And whether buying or selling options you might’ve not survived high volatility years like 2018.
If you’re just an investor who wants to mostly buy and hold for more than a week, there is probably nothing worse then buying and holding options/calls. Most people sell options for a reason.
As an example, if you buy stocks directly, they will occasionally move 20% up and down and you’ll have problems trying to decide when is good time to sell at profit, or if you’re losing and your account is down 20% you’ll get scared and also may want to sell, or simply won’t sleep worrying about how much more you may lose.
But if you hold ITM calls, your option value or whole account may be 40% down or even 70% down or 100% down if the price really drops, even temporarily. There is no way you’ll survive even a 40% drop in option price (vs 20% in underlining stock for example), either psychologically or financially or margin-wise.
In my opinion your question doesn’t even have a place here because the only way to understand the implications is to have minimal experience trading options in variety of ways. So either do paper trading or invest less than 1% of your account info “playing” and learning options, or do some testing on ThinkOrSwim demo platform where you can backtest an options strategy based on past data using their “ThinkBack” feature. That feature lets you pick any past date and buy/sell options, then see how it would perform going forward. So try buying any ITM options in January 2018 or Sept-Nov 2018 and see what would happen going forward. You can also test buying or selling options each week, each month, etc (just manually keep changing dates and buying/selling options for each one). In fact, learning the ThinkBack feature may be the best investment you can make right now.
