Only trading options instead of stocks?
- Thread starter 1a2b3cppp
- Start date
If you really want to gamble, ask sanglucci.com son.
Nonesense. Please don't comment on options when you lack the full experience to understand them. Many strategies are all about extra leverage on a strong trend. For example, a well placed $1000-$2000 can give you the option to buy or sell $500,000-$1,000,000 worth of stock.
This is just one of dozens of reasons to buy or sell options.
1a2b3cppp,
Options are really quite complex and are not something you can just jump into with a long term view but not being aware of all your options (no pun intended) at the time.
You mention that you often use ETFs and average down - in theory a person could do similar with options even though they do expire - for example, you could buy LEAPS (for now you can buy up to Jan 2013 with most), and if they were running low on time, you could then roll them to the next LEAPS (such as 2014, etc.). You would lose on your current options, but would be able to buy lower strike options for the next expiration for a similar price as a higher expiration. If the ETF rebounded strongly, you could make nice gains. Of course, eventually you would have to get it right, just like you do with DCA using ETFs - if an ETF you owned ever went to basically 0 you would lose out and if it stayed near 0 for an extended time, your money would be wasted sitting there.
If you play options where you can make money in either direction, you have to pay more, as I think you realize - of course, this can give you the chance to be wrong and still profit, which is tough to do with stocks! For example if you were certain AAPL was going up to 400+, but wanted to be hedged, you could buy the 340 straddles - then a week from now, if AAPL tanks and the stock falls into the 250 range or even lower, you could walk away with nice gains even though you were completely wrong on your assessment. As you state, you would have to decide how much time you wanted to buy as the straddle would cost much more for say Jan 2012 compared to May (right now about $8000 compared to $3400).
One thing in your case that you could do is lets pretend you have an ETF you are buying that is worth $60 normally - then it falls and you buy more at $45 - then it falls and you buy more at $35 - it falls again to $25 and you are thinking it is really cheap, but you hate to keep buying it - you could buy some $25 strike calls instead of the ETF - if it continues to fall, you would lose less money probably because of putting less up front - on the other hand if it rises, you could make good returns as it goes back to $35/$45, etc. For example, instead of spending $2500 for 100 shares, maybe spend $200 for a 25 strike call - lets say 2 months later it is at $35 again - your call (assuming it is still alive!) is worth at least $1000 - so you made $800, while risking only $200 (and of course, you could have bought 2 calls, 3 calls, etc.). On the other hand, if 2 months later the ETF is all the way down to $12.5 - instead of losing $1250, you just lost the $200 per call.
These are just simple examples of course - there are tons of things you can do with options in theory. It is harder knowing for sure what to actually do.
JJacksET4
Start with cash-secured puts on volatile equities/ETFs that you want to own - for a discount.
Probably the safest thing... because:
1.) You get an immediate credit/income to your account.
2.) If the underlying moves to your short strike, you are closing in on the chance of getting that underlying at a discount rate...
3.) If the price blows through your short strike - at least you get something (the underlying stock) when you "lose" and are assigned.
You can then hold the underlying, wait for it to recover... sell it off... repeat. Of course, if the price never moves past your short strike, you can just sell another put, the next month, next several months out. If you play it right, you win by winning and "win" by "losing."
That said, options can make you feel like a genius one minute and a complete idiot the next.
Probably the safest thing... because:
1.) You get an immediate credit/income to your account.
2.) If the underlying moves to your short strike, you are closing in on the chance of getting that underlying at a discount rate...
3.) If the price blows through your short strike - at least you get something (the underlying stock) when you "lose" and are assigned.
You can then hold the underlying, wait for it to recover... sell it off... repeat. Of course, if the price never moves past your short strike, you can just sell another put, the next month, next several months out. If you play it right, you win by winning and "win" by "losing."
That said, options can make you feel like a genius one minute and a complete idiot the next.
How sure are you? Give me ONLY one example where an ATM call delta is below 0.5, if you think you are right.
What happened to the 0.5 answer? You did not give an example. It must be tough to search for something that may not exist.
What do you have to offer if I were consider teaching you what you lack in options?
What the fuck are you talking about TJ? Please pick up a Natenburg text when you get the chance.
There is a reason you shouldn't do that, the concept of risk and reward still applies albeit a bit differently. Leverage is kept low for all sub $100k traders because of people like you. There is a maximum amount of exposure you should have on an instrument in any point in time.
I don't have an in depth understanding of options but judging from your post, neither do you.
What the fuck are you talking about?
Did you not state that call delta can be 0.5, or below 0.5? Read the posts in this thread. Give an example if you think the statement is right. There is an option calculator online.
Good luck to you finding your (non-existent) examples?