Ironically one of the board of directors of LTCM is Myron Scholes, one of the two people who invented the Black-Scholes model https://en.wikipedia.org/wiki/Long-Term_Capital_Management, the most fundamental option pricing model and is a Nobel Price laureate for Economics. This is a guy who basically invented how options are supposed to be priced and the hedge fund that he headed that involved investing in options still ended up in dissolution and bailout. That just tells you how difficult trading options is.
Options.,... Argh... no more!!
- Thread starter Jdesey
- Start date
Ironically one of the board of directors of LTCM is Myron Scholes, one of the two people who invented the Black-Scholes model https://en.wikipedia.org/wiki/Long-Term_Capital_Management, the most fundamental option pricing model and is a Nobel Price laureate for Economics. This is a guy who basically invented how options are supposed to be priced and the hedge fund that he headed that involved investing in options still ended up in dissolution and bailout. That just tells you how difficult trading options is.
You can doubt, I don't really care and will not be posting my trading journal. That would be dumb when there are ET trolls just waiting to steal someone's hard work. No different from the other idiots saying you do not trade but, would steal your trading system at the first chance. I am here to post my opinion only. I do not owe anyone on ET anything. I have offered advice to struggling traders. Not here to impress anyone. I trade my own monies so, any profits I derive, is mine to spend as I wish.
It is the leverage but, you have to understand what you are doing. A lot of traders trade blindly, without an edge. If you do not have an edge with the trading system you are using, you might as well to to Las Vegas and gamble there. The result is the same, you will lose all your monies.
Jdesey, I'm on the other side of you. I am the one selling you my options (covered calls). Yeah, you could hit a big one I sell (Apple)...But, you can (and do) lose a lot of the out of the money options that expire worthless. I chug along earning 10-20% many times and am happy with that outcome.
I have extra cash I am trying to invest...Looking for income. Here is an example I will do with a quality stock. I'll buy 200 shares of Exxon. I'll then option 100 shares of it either way out of the money (if I think it will rise) or just out of the money (if I am not sure it will rise or fall).
I gain the dividend, option money, increase of price. If the option expires worthless, I'll repeat. If interest rates rise (money market), the float of the option money and dividend money will compound to make more money. This works very well with high money market rates (curse you Fed).
Please, no ripping in what I do. I've explained many time on these boards why I do it. My CPA, attorney, former investment advisor (Morgan Stanly) all agree it can be profitable. Buy quality on the dips...Good company (bad quarter).
I have extra cash I am trying to invest...Looking for income. Here is an example I will do with a quality stock. I'll buy 200 shares of Exxon. I'll then option 100 shares of it either way out of the money (if I think it will rise) or just out of the money (if I am not sure it will rise or fall).
I gain the dividend, option money, increase of price. If the option expires worthless, I'll repeat. If interest rates rise (money market), the float of the option money and dividend money will compound to make more money. This works very well with high money market rates (curse you Fed).
Please, no ripping in what I do. I've explained many time on these boards why I do it. My CPA, attorney, former investment advisor (Morgan Stanly) all agree it can be profitable. Buy quality on the dips...Good company (bad quarter).
Didn't expect you would have a trading journal anyway but as long as you clarified that it's just your opinion that you posted and it's not really based on any trading endeavours, I am fine because the way that you stated in your first post, it sounded like that your trading profitable strategy is actually based on some actual trading you did, which is impossible. Options trading is not just about technical analysis, it's also based on math. It is almost statistically impossible to be profitable with your strategy according to how options are priced. So unless you can provide your trading journal to show actual trades, your "opinion" is just that, opinion.
Just don't want people to be misled.
What gets posted on the message boards is just that opinion. Now, there are a lot of good traders on ET. Do I ask them for proof? No. Just based on what they post, I know if the person is a real trader or one of the numerous fake, ET trolls out there. If you have a real understanding of how the stockmarket works, you would understand what a real fellow trader is talking about. If not, you do not know squat. If I was not making monies trading, I would not bother trading, why would I trade? To stoke my ego? I am a self-taught trader who did not have a mentor, learning to trade. I made a lot of mistakes at the start. The profits I put in my pockets is certainly, not imaginary but, believe what you will. You deem something is impossible because you have not done it and have no real understanding of how the stockmarket works. I will be the last person to dissuade you from your false assumptions. The more dumb traders, the easier for those of us, who know how to trade to make monies.
That might be your issue. Most people are lured in by the prospect of hitting the home run ball into the river. They see someone that put up 17 cents and two days later sold for $300 or whatever. While sexy and a really cool story, that's not how you make money long term in options.
The beauty of options is nothing more than FLEXIBILITY. With equities you can be long or short. With options you can be long and short at the same time, cap losses and gains, make a few bucks working against a core position, scoot a position up and down the ladder to improve chances of profitability...literally a limitless array of possibilities.
On this forum you have lots of people that engage in a wide variety of strategies that are all over the map. The hard part for you is finding something that works for you and suits your personality. Or maybe - as you may have decided - that options aren't for you, which is fine too. But the reason so many people are flocking to them is because you are really limited only by your imagination in terms of the kind of positions and structures you can establish.
IV30 is at its high since covid implosion,so thats not a great example(SPY)..
Selling naked OTM option's is pretty dam close to fools gold,and i am 100 percent with you on ratios and butterflys..
The real problem with shorting options when IV30 rank is 50% or lower is you have to employ leverage to earn a human return..Far better ways to make money than that game..
Im not plugging Orats(or am I?),but almost every newbie has ZERO clue to if they are getting or giving edge based on historical price distributions...
Thats step 1..Step 2 is to use your noodle and come up with a disciplined trading plan/MM so you can overide trades with edge that go bad...
Selling naked OTM option's is pretty dam close to fools gold,and i am 100 percent with you on ratios and butterflys..
The real problem with shorting options when IV30 rank is 50% or lower is you have to employ leverage to earn a human return..Far better ways to make money than that game..
Im not plugging Orats(or am I?),but almost every newbie has ZERO clue to if they are getting or giving edge based on historical price distributions...
Thats step 1..Step 2 is to use your noodle and come up with a disciplined trading plan/MM so you can overide trades with edge that go bad...
Selling puts to acquire stock or selling calls to exit a position at a given price makes sense. If there's a stock that I would like to acquire, but not urgently, I would rather sell a put than place a limit buy order for the stock especially if it's close to earnings.