Selling options... why is it too easy?

[opt789]

Quote from tdatspectral:

Why is it so easy to make money selling options? What is the catch? I am fairly new to trading options and have much to learn. I did pretty good in Sept by buying calls and puts and selling them when the market hit a turning point. But after reading a bit I discovered that I could sell puts and calls and pocket the premium, making a guaranteed profit if I played it right. Mostly using the last week before expiration.

If I am sure where the market is going that week, then it's easy money. If I am not sure, I could sell a spread and let them both decay, closing the one side of the spread before it reaches the strike price.

Why is this so easy? Could effectively double my money twice a month if I was a pig (which I'm not). So what's the catch, where's the downside? The only one I can think of is if the market crashes or skyrockets while my head is turned away.

???

This is a joke right?
HoCo is back pulling our leg?
Or is this just one of the most moronically stupid posts in awhile?

 

[Dael]

Main misunderstanding in your thoughts is that you can buy back the loosing leg taking loss and almost compensate it with the profit of the opposite one. Absolutely not. In case of a sharp move your loosing leg will be much worse than opposite due to volatility increased.

Say you sold call 1000 for $100 and put 800 for $100 while underlying was 900. After one rapid move of UL to 950 you'll get put with $20 quote (and $80 profit) and call with $400 quote (and -$300 loss).

This is an options selling in a nutshell. The closer to price option will generate much more loss than the opposite side with profit. So you can't just buy the whole back and open the new one. You have to adjust opened positions.

 

[baro-san]

Quote from tdatspectral:

Why is it so easy to make money selling options? What is the catch? I am fairly new to trading options and have much to learn. I did pretty good in Sept by buying calls and puts and selling them when the market hit a turning point. But after reading a bit I discovered that I could sell puts and calls and pocket the premium, making a guaranteed profit if I played it right. Mostly using the last week before expiration.

If I am sure where the market is going that week, then it's easy money. If I am not sure, I could sell a spread and let them both decay, closing the one side of the spread before it reaches the strike price.

Why is this so easy? Could effectively double my money twice a month if I was a pig (which I'm not). So what's the catch, where's the downside? The only one I can think of is if the market crashes or skyrockets while my head is turned away.

???

"making a guaranteed profit if I played it right"
"if I am sure where the market is going that week, then it's easy money"

Do you realize that you sound exactly like all that junk mail that entice you to give a call to the given number to claim your prize because "you're a winner ...", or "you've already won ..." "if you number was drawn"?