Options strategy to return 6.5% annum with low risk.

[darwin666]

to be honest, I have ways that I can make money in the market, that work, and options seem very complicated. The more I have researched this, the more complicated it seems. It almost seems you either need to be a professional investor, or to have a PhD in physics to succeed with them.

OPTIONS ARE NOT COMPLICATED....
PUTS ARE LIKE INSURANCE.
U SELL INSURANCE ON A CAR FOR A YEAR. 20k CAR. U GET 1000 $.
.IF THERE IS A TORNADO OR CAR WRECK.- U ARE @%%^%
-
CALLS ARE LOTTERY TICKETS. U SELL OR BUY THEM AND THE STOCK MOVES! AND MAKE OR U REPENT!. HA HA.

ITS THAT #$@% SIMPLE..

both are time decay wasting asset... !!!!!..

 

[drcha]

Yes, they are complicated. You don't need a PhD in physics, but you do need a deep interest and a lot of time to read, think, and paper trade. It's best not to mess with options unless you understand them and want to continue learning about them. It's not a weekend avocation. Your wallet will be better off if you learn about them. Your body will be better off if you choose the gym. Which is more important to you? Or can you split the difference (I guarantee you would not be the first person to read books about options on the ellipse or stair climber)

 

[El OchoCinco]

Well, I know this is a biased board, but given that I do very well in the bond, stock, and preferred stock markets, is it even worth my time to learn? Do people in options do much better than people in stocks, assuming they understand them?

If you are making money with something and feel comfortable with it, then no, there is no reason to convince you to try trading something else. People in options do not do better versus stocks or vice versa, it all depends on the trader and how they are trading. Stick with what you know and are comfortable and no need to venture into other waters if you truly don't want to.

 

[alexpun]

With the OP definition of "risk fee" S&P 500 is risk free too.

I mean with preferred share you have tons of interest risk and OP don't even recognize it.

 

[shMark]

If you are making money with something and feel comfortable with it, then no, there is no reason to convince you to try trading something else. People in options do not do better versus stocks or vice versa, it all depends on the trader and how they are trading. Stick with what you know and are comfortable and no need to venture into other waters if you truly don't want to.

Thanks. That is what I am leaning toward.

 

[tommcginnis]

Options are not any more "risky" than your home insurance is.

Buying the fund described is paying money for the (as described) small amount of work, for something that you can then not. Immediately. Control.

 

[HappyTrader]

Writing a covered call on a position you already hold is not adding additional risk. The only source of risk is the position itself.

Writing a naked put is risky, but your risk is capped.

Writing a naked call is very risk, as your risk is not capped.

When it comes to options, it generally breaks down into three categories:
No Risk (Covered Calls as the risk is in the original stock position)
Capped Risk
Unlimited Risk

The risk in trading options is that if you don't know what you are doing, you may accidentally engage in an unlimited risk strategy.

It is best to make sure you know exactly what you are doing before you execute an options trade. Especially if you are SHORTing (selling) an option.

Once you start getting into multi-leg option strategies it becomes more complicated and these tend to be for persons who are speculating on direction, and could be exposed to unexpected risk if certain assignments prematurely get triggered. So, not for the casual trader.


A Buy/Write ETF takes away the risk of trading *options* in exchange for the risk of holding an ETF.

 

[alexpun]

Writing a covered call on a position you already hold is not adding additional risk. The only source of risk is the position itself.

Writing a naked put is risky, but your risk is capped.

Writing a naked call is very risk, as your risk is not capped.

When it comes to options, it generally breaks down into three categories:
No Risk (Covered Calls as the risk is in the original stock position)
Capped Risk
Unlimited Risk

The risk in trading options is that if you don't know what you are doing, you may accidentally engage in an unlimited risk strategy.

It is best to make sure you know exactly what you are doing before you execute an options trade. Especially if you are SHORTing (selling) an option.

Once you start getting into multi-leg option strategies it becomes more complicated and these tend to be for persons who are speculating on direction, and could be exposed to unexpected risk if certain assignments prematurely get triggered. So, not for the casual trader.


A Buy/Write ETF takes away the risk of trading *options* in exchange for the risk of holding an ETF.

Writing a naked put has the same risk profile as writing a covered call.
Do you see why?

 

[shMark]

My other concern is that it will take too much time. I will need to learn the strategies. Then paper trade at Interactive brokers for probably 6 months so I know what I am doing. My friend said he made 35% on a few minutes a day of work. I think he did know options, but was also bragging. How much time does it take to trade options? I trade close end funds, not ETFs, and it takes me an hour a week. I make my money on the relative discount to NAV, the absolute discount to NAV, and the leverage they use. I would tell you how I do it, but I took a class 10 years ago, and signed something stating I would not reveal the method. I was a quant for 3 years, but under performed the s and p, by 1% per year. There is one person who is a quant who beats the market by 18% a year for 11 years now. However, that is one out of probably 200.

 

[shMark]

Writing a naked put has the same risk profile as writing a covered call.
Do you see why?

Sure, with a naked put, someone will buy the stock at 35, and then you have to buy it from them at 40.00. With a covered call, you need to let some buy a 40 dollar stock from you at 35.00.