Yeah buying options is hard. You not only have to be correct on the direction of the move, but also the magnitude of the move and the timing of the move. If you are wrong just on one of three, you won't make money. Yes one big huge move is nice but would it cover all of the small losses that you are making before that? That's the question.
Options.,... Argh... no more!!
- Thread starter Jdesey
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Yeah buying options is hard. You not only have to be correct on the direction of the move, but also the magnitude of the move and the timing of the move. If you are wrong just on one of three, you won't make money. Yes one big huge move is nice but would it cover all of the small losses that you are making before that? That's the question.
Yes you do. The current volatility tells you what price you pay. And the ending stock price is a function of the realized volatility (scaled on a different time frame)
I highly doubt that you are making money. The premiums on ITM options is HUGE not to mention ITM options so far away into the future. It would take a tremendous move for you to make money and when the options are so far out into the future, the vega is very low so even for a huge move, the price won't move as much. There is no way you will have an edge over the sellers.
Feel free to post your trading journal.
exactly!!! but hey,, all the little retail investors think they can get that all correct. The real issue is why options are so attractive, it is the possibility of making alot of $$ from a small amount put up. Just like the big come on for Forex.
Well at least options, unlike Forex, are traded on central exchanges and cannot be so readily manipulated by bucket shop brokers although they are still subject to manipulations by the market makers due to PFO. But it's lot more challenging to make money on options.
True, but that doesn't matter in all cases. Say I short a SPY call and volatility jumps. Then usually the underlying drops (a few exceptions to that, notably earnings and other announcements). Option price increases due to higher volatility, but decreases due to underlying moving further away from the strike. Which one wins out depends on time to expiration.
implied volatility is the present value of future realized volatility.
Where a stock trades at expiry vs where it began is realized volatility on a different timeframe.
thus all options trading is volatility trading with other risks (primarily delta) thrown in.
Options.,... Argh... no more!!
Do you have a thread or post that outlines your process?
How did you determine which stock and what triggers a buy to enter that stock, are you a methodical trader or an intuitive artistic trader, or a fundamental trader...?
E.g. a trader might have bought a put on moderna by way of fundamental approach, an artistic intuitive trader might have heard of possible dangers of jabs and saw a big Moderna logo in a dream, or a methodical trader might use a Price Action approach using a Very Specific Setup and Trigger to Buy Puts To Enter.
Which approach were you using?
Shelly!
The majority of options expire worthless, an realized volatility is fairly consistently less than implied volatility. These facts would lead one to think that structured selling strategies are the smart way to go. LTCM and Supertrader Karen are dramatic examples of the how flawed that mindset is.
I learned along time ago stay away from outright speculative strategies, and stick with simple hedging strategies. That is when I use options at all (too many parameters to get right.)
I learned along time ago stay away from outright speculative strategies, and stick with simple hedging strategies. That is when I use options at all (too many parameters to get right.)