Selling options is just as risky as buying options.
Theta works in favour of sellers.
Is Options Trading Investing?
- Thread starter ironchef
- Start date
Theta works in favour of sellers.
In exchange, you give up unlimited upside and incur unlimited downside. It all evens out eventually if you trade frequent enough. I don't think buyers are willingly/happily handing sellers $$$.
How do I know? I calculated the probabilities, expectancies and actually mechanically sold OTM calls and puts (>>hundreds) to collect premiums but netted me a loss.
I am saying spend more time learning how to invest, trade, gamble or speculate, or whatever you want to call it than care about what it should be called. No disrespect or offense intended at all but there are tons of these threads arguing about semantic of what something is called and it makes sense why people lose money because of misplaced focus. I make money trading a product and my earnings are not bigger or smaller depending on what a 3rd party calls it.
Anyone who asks me trading advice personally I always tell them, make money and block out all the noise that is useless and distracting. One of my quotes is "Edge..Shmedge...just make some fucking money!"
Theta works in your favor, gamma works against as does vega...half a dozen or 6 it is the same crap. greeks always offset in some way.
Bottom line is don't let someone else's vag weakness deter you from what you are doing.
"options re too risky..."
"You are just gambling in the market..."
"Too hard to make money...."
Tell them to eat a bag of dicks since why should they care what you do with your own money. I do not tell anyone I trade futures (invest or whatever you call it haha). Just not worth the oxygen.
"options re too risky..."
"You are just gambling in the market..."
"Too hard to make money...."
Tell them to eat a bag of dicks since why should they care what you do with your own money. I do not tell anyone I trade futures (invest or whatever you call it haha). Just not worth the oxygen.
Options trading is definitely not investing -- investing is meant to generally build a slow and steady future;
While options trading is much more high risk, high reward -- for people who understand that, and have the risk appetite for it.
Options trading can kind of be treated as running a small business, if you're a seller of them collecting that premium.
If you're a buyer of them, then that's kind of gambling -- that definitely requires skill
As far as I'm concerned: Everybody calls the stock market as essentially gambling.-- that's why that famous disclaimer is on the bottom of everything: 'Be prepared to lose all of your initial investment. Nothing is guaranteed. yadda yadda yadda'
That's why people generally say Diversify across a range of stuff...so you can't get that hurt (and also, not really gain)
I tell people I'm a Stock Trader (not an Options Trader) ...no one essentially knows what are Options, and you have to explain it alot after that.
It's easier to just say Stock Trader, everyone understands what are Stocks -- but not so much with options.
both are essentially the same thing, or same principle anyways...your ability to understand and predict the underlying.
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Every time I told my family and friends that I was an options trader, invariably the comments were: You are nuts, it is too risky; don't speculate; don't gamble with your money..... So, to the general public, trading options is risky business, like gambling. Even on this site, numerous folks differentiated trading from investing and I read posts here that told us not to gamble away our money by trading options.
I used to think trading was different from investing. About a decade ago I started trading equities (day trade, swing trade...). The results were nothing to brag about and led to my opinion.
However, my opinion is shifting. For the past 3 1/2 years I switched to trading options. It became my sole daily work and the principles behind my options trading were very similar to my investing. So, I am now including options trading as part of my overall investing strategy. ET helped crystallized and focused my thoughts and explained some of the subtle aspects of options trades and I am grateful for that.
To you, is options trading investing, speculating, work or a business? It would be interesting to hear your thoughts.
They are partly correct. There are a few types of options traders:
1) Those who buy/sell options on speculative trades expecting to take advantage of leverage to reap huge profits (but also take high risk if they speculate wrong)
2) Those who buy/sell options as a way to leg into or out of a position.
3) Those who buy/sell options as insurance coverage or income generation.
Most likely they are thinking of Type 1, which is the risky way to use options.
Type 2 is more about investing then trading (you get to decrease the price when buying in, or increase the return when selling out). This is not really a speculative trade, more of indicating when you want to buy/sell.
Type 3 is actually in some ways the opposite of what they think: Insurance protection is meant to protect you from loss. And Income Generation is usually (when done 'right') meant to be a low speculative, low risk, low return, but consistent return strategy.
If you are 'Day Trading' options, it's really just 'Day Trading' stocks but slightly different (and more complex). However, that is trading and less the investing. Investing really suggests you plan to buy a portion of a company because you see long term returns in that investment. Whereas trading is less concerned with the long term growth of the company and more concerned with the short term returns of the stock price.
I like your analogy comparing trading to running a small business. Often it felt that way: It was like going to work every day, from 6:30 to 1:00 (PST), I was working for myself, perhaps sometimes on the phone talking to my broker or comparing notes with friends who also traded options. What I liked was the flexibility; I could skip if I had something more important; I could trade at home, while shopping, on travel, even out of the country at times. All I needed was an internet connection, my laptop or just my mobile phone.Options trading is definitely not investing -- investing is meant to generally build a slow and steady future;
While options trading is much more high risk, high reward -- for people who understand that, and have the risk appetite for it.
Options trading can kind of be treated as running a small business, if you're a seller of them collecting that premium.
If you're a buyer of them, then that's kind of gambling -- that definitely requires skill
As far as I'm concerned: Everybody calls the stock market as essentially gambling.-- that's why that famous disclaimer is on the bottom of everything: 'Be prepared to lose all of your initial investment. Nothing is guaranteed. yadda yadda yadda'
That's why people generally say Diversify across a range of stuff...so you can't get that hurt (and also, not really gain)
I tell people I'm a Stock Trader (not an Options Trader) ...no one essentially knows what are Options, and you have to explain it alot after that.
It's easier to just say Stock Trader, everyone understands what are Stocks -- but not so much with options.
both are essentially the same thing, or same principle anyways...your ability to understand and predict the underlying.
If only my profits are more steady and predictable; well that is also true with small business.
Another side note: Running a business usually contributes something positive to society. I am not sure my trading contributes anything useful?
Regards,
Another side note: Running a business usually contributes something positive to society. I am not sure my trading contributes anything useful?
Regards,
I tend to disagree. The only way you can run a successful small business is to have customers willing to pay for what you sell and do so over and over again, thus you are provided something useful to somebody. Futures and options are not really contributing anything as they are derivatives, we are just making money off of each other. And I have no problem with that
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