Only trading options instead of stocks?

1a2b3cppp · Mar 27, 2011

Quote from stevegee58:

I trade only options and no stocks. But my option positions are NOT designed to replicate long stock positions.

I stopped owning stock a few years ago when I realized it's too risky.
You can't beat the defined risk of a properly-formed option position.

Please share more with me about this.

Thanks.

Nine_Ender · Mar 27, 2011

Quote from d08:

For a purely directional play, that is definitely too much leverage but I guess for hope-and-pray traders it's not. I suspect that you don't have enough on your account to take the position in stock so you need to use options.
Also, you might want to search for the meaning of "spread" and you'll find it very unfavorable for options compared to stocks.

You're obviously an idiot who understands very little about options. Buying or selling options is nothing about hope or prayer, its about understand risk/reward and the fundamentals of the underlying.

Just keep yapping away you just seem more and more ignorant by the post.

spindr0 · Mar 27, 2011

Quote from d08:

For a purely directional play, that is definitely too much leverage but I guess for hope-and-pray traders it's not. I suspect that you don't have enough on your account to take the position in stock so you need to use options.
Also, you might want to search for the meaning of "spread" and you'll find it very unfavorable for options compared to stocks.

I have to give you props for honesty. When you stated on page 4 of this chain tht you don't have an in depth understanding of options, you were telling the God's honest truth!

As for size, I'd be willing to bet that the average annual amount of equity trading in my account far exceeds what you'll earn in income in your lifetime. And I'm willing to put money on that. Are you? I doubt it... so give me your next clever jab to help you rationalize your market inadequacies.

the1 · Mar 27, 2011

Correct! One of the biggest obstacles to trading options is the time decay. You have to be right very quickly and the move the stock makes needs to be fairly substantial to drive the option price to a nice return. There there's the slippage. Trading options is much more difficult than trading stocks. Personally, I prefer the futures markets and stocks for investing with options to hedge or the inverse ETFs. It's a matter of finding what works before for your strategy and goals. Speculating with options ain't for me. I'm a consistent loser in that market. Speculating in futures is a winning game for me so that's where I play. I just love the Oil contract. You can also ride bonds for quite a while.

Quote from Magic8:

Be careful with options. They are like milk: they all spoil, expire, and have to be thrown out. You can waste thousands of dollars buying these decaying assets. You have to be right on the direction (up, down, or even sideways) in order to have any chance... You can also sell them...

tradingjournals · Mar 29, 2011

Quote from Maverick74:

Are you drinking? All ATM options have a .50 delta. ALL!!!!!!!!

If a stock is at 100, what is the probability of it closing above or below 100? It's 50%!!!! So the 100 call has a 50 delta. I don't need to give you an example as basic math seems to be a challenge for you.

They have moved this thread to options.

What does the prob above has to do with the delta?

The reason a call has a price is because the above prob and the delta are not equal.

Still waiting for an example where ATM call delta is equal or less than 0.5. How come it is taking so long to come up with just one counter-example? Maybe it does not exist.

MasterAtWork · Mar 29, 2011

1 year call struck at $100
Spot is $100
interest rate is 2%
Dividend rate is 15%
volty is 30%

Delta is 0.3344 or 33.44% and this option is "At The Money" e.g strike=spot.

Is this what you were looking for ?

(This is a pure B&S)

pitcher · Mar 30, 2011

There are 277 million bbls of oil in the US reserves, we need to use them to save US AMERICA. We also need to stop oil futures trading.

tradingjournals · Mar 30, 2011

Quote from MasterAtWork:

1 year call struck at $100
Spot is $100
interest rate is 2%
Dividend rate is 15%
volty is 30%

Delta is 0.3344 or 33.44% and this option is "At The Money" e.g strike=spot.

Is this what you were looking for ?

(This is a pure B&S)

At The Money = forward price.
(This is a pure B&S)

MasterAtWork · Mar 31, 2011

Quote from tradingjournals:

At The Money = forward price.
(This is a pure B&S)

No. That 's 'At the money forward', and just for european style options.
Sorry.

But please, would you show us the forward for american style ones.
You have all the time you need.

You may need some help : "An option is at-the-money if the strike price is the same as the spot price of the underlying security on which the option is written. An at-the-money option has no intrinsic value, only time value" (McMillan)
That means no intrinsic value for the call and for the put, eg strike=spot.

SCI new york · Apr 6, 2011

Quote from the1:

Correct! One of the biggest obstacles to trading options is the time decay. You have to be right very quickly and the move the stock makes needs to be fairly substantial to drive the option price to a nice return. There there's the slippage. Trading options is much more difficult than trading stocks. Personally, I prefer the futures markets and stocks for investing with options to hedge or the inverse ETFs. It's a matter of finding what works before for your strategy and goals. Speculating with options ain't for me. I'm a consistent loser in that market. Speculating in futures is a winning game for me so that's where I play. I just love the Oil contract. You can also ride bonds for quite a while.

I will respectfully disagree here. There are plenty of ways to play options, just just straight shot call/put buying on a directional play. There are ways to hedge time decay, ways to increase leverage, and a host of different strategies for all kinds of markets. But the strategies can get complicated and you spend time adjusting and readjusting your positions depending on how the trade is going. It's not something to learn overnight but it can be very advantageous.