Question about option liquidity

[breeze]

Quote from dagnyt:

1) You can always sell your option - unless it is so worthless that there are no bids.

2) Yes, you can close your put (by selling) at any time - as long as it is before expiration

3) DO NOT EXERCISE. The reasons can get complicated, but as an individual investor, it's likely you will go your entire lifetime and never exercise an option. It is much better to sell them.

4) 'I want to buy option instead of stock'

That statement is frightening.

If you want to buy PUT options, then you would NEVER consider buying stock.
Are you certain you know the difference between a put and a call?

5) It is VERY difficult to make money when buying options. Please be certain you understand what you are doing before placing your money at risk.

Mark
http://blog.mdwoptions.com

From the link at the end of your post, I went to your blog and I am still reading your blog. I just ordered one of your book - Rookie's Guide to Options. I also ordered two other option book, The Volatility Edge in Options Trading: New Technical Strategies for Investing in Unstable Markets, and The Bible of Options Strategies: The Definitive Guide for Practical Trading Strategies. I hope I will learn a lot about option from your book.

Thanks for the warning about difficulty of making money from buying options.

 

[spindr0]

Quote from breeze:


When I long or short stocks, I use small position to control risk. Because of the small position of each trade (usually a few hundred shares), even the stock moves exactly as I expected, I only make small gains. I thought option would allow me to put on much bigger position and therefore gains with fixed max risk. Of course I was a little wishful thinking. Anyway, I am going to continue to trade stocks. At the same time, I will try to learn option trade as much as possible.

There are tradeoffs with every strategy. You could put on much bigger positions with options, have a fixed max risk and make a bundle. But in order to do so, you're going to have to be right not only about the direction but in a specific time frame.

Don't knock small gains. You'd be surprised how they add up when you trade volume and control the net losses. You can even achieve that with a high win rate despite a less than even dollar win/loss ratio or a lower win rate with a higher dollar win/loss ratio. It's the bottom line that matters.