Out of curiosity: anyone here consistently predicts market direction?
- Thread starter Aquarians
- Start date
In an uptrend sell puts and buy calls, free speculation.
%%
Exactly;
+ if one could really predict, one could own most everything +no one does.Trends can be profitable-- but that is not a prediction.
.Like speedo says = markets cycle...………………………………………………………………………………..And that is fine getting paid once a week or more; some of the best paychecks come non/weekly, with good trends
With out of the money calls, the price has to do 3 things if you want to make money:
1 : it has to move the right way.
2: it has to move fast enough to overcome the time decay.
3: it has to be above the strike price on of before expiration.
On the other hand, when you sell puts the price has to stay above the strike price and that's it!
So selling puts clearly puts the odds in your favor.
The problem with this approach is that it usually has a worse Sharpe ratio than just buying the asset. When the asset goes up you make money on the sell-put position but not as much as you would have made by holding the underlier. And every now and then the underlier drops so sharply that your sell-put position is losing a lot. Taking that lot from the already lower-than-market return.
Yes, but you pocket the premium more often. Plus the market can do a lot of things and you still get to keep the premium money.
The option seller is just looking for a steady income, he is not interested in doubling or tripling his account in a month with cheap, deep out of the money long put or call options (what I call lottery tickets).
Last edited:
Much easier to predict direction of implied volatility than direction of the underlying.
So you predict liquidity?