The ability to unwind an inventory at various times prior to expiry makes the comment in the initial paragraph not as relevant to the retail trader. Not that your comment is incorrect, it's just that it can be true and still a book of centralized short gamma with excess wingstrike protection remains a preferred position. Leptokurtosis makes it statistically favorable to take this type of position, depending on the underlying. As time plays out, your p/l and greek profile will dictate when to unwind. In one sense, you're waiting until chance plays to your favor, and then you take advantage of it. You won't often hit homeruns, but you'll be profitable. Of course, you can't simply watch the position like a stoned hippie, but the extra wingstrikes are what makes the position manageable.
Is Option Buying A Loser's Game?
- Thread starter tradingjournals
- Start date
The ability to unwind an inventory at various times prior to expiry makes the comment in the initial paragraph not as relevant to the retail trader. Not that your comment is incorrect, it's just that it can be true and still a book of centralized short gamma with excess wingstrike protection remains a preferred position. Leptokurtosis makes it statistically favorable to take this type of position, depending on the underlying. As time plays out, your p/l and greek profile will dictate when to unwind. In one sense, you're waiting until chance plays to your favor, and then you take advantage of it. You won't often hit homeruns, but you'll be profitable. Of course, you can't simply watch the position like a stoned hippie, but the extra wingstrikes are what makes the position manageable.
Wow, it sounds like Jack Hershey stole your account..
livevol_ophir
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This isn't quite true. Options in general are insurance, and insurance can have an expected negative value to the buyer, in return they get safety. If this wan't the case, insurers couldn't exist. I mean, it's not like AIG is going anywhere... oh, wait, ok, skip the AIG part...
+1Quote from livevol_ophir:
This isn't quite true. Options in general are insurance, and insurance can have an expected negative value to the buyer, in return they get safety. If this wan't the case, insurers couldn't exist. I mean, it's not like AIG is going anywhere... oh, wait, ok, skip the AIG part...
They say, "80% of options expire worthless". And don't "Da Boyz" game the market so that whichever side was expensive 10 days ago, goes off nearly worthless at expiration?
Therefore, odds favor the writer.
Not to say one shouldn't buy options.. just be judicious.
Therefore, odds favor the writer.
Not to say one shouldn't buy options.. just be judicious.
+1
I`m always a buyer. My strat is somewhat RTM and once i`ve got the go there are 4 levels I add into. All ATM or ITM, scenario dependant.
Buying options gives me clear risk in a situation that can spiral otherwise. And I enjoy the benefits of unlimited upside. Theta is a small price to pay for that, for me.
Good trading to you all.
How often does that unlimited upside work out for you, vs a spread with much lower upfront cost but a capped upside? The option strats I've looked at always found a spread was better than an a single position.