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Selling premium
- Thread starter NKNY
- Start date
Quote from metooxx:
Exactly ...
God, I'm slow. I finally realize what this is about. Metooxx wanted to spark a debate before being prevented from registering an alias. It's been a while since somebody came along asking how to make money in options, or, a magic bullet. I try and help visitor the options forum, but, sometimes laziness takes over or it is beyond their comprehension. People should read the books.
Quote from Trajan:
God, I'm slow. I finally realize what this is about. Metooxx wanted to spark a debate before being prevented from registering an alias. It's been a while since somebody came along asking how to make money in options, or, a magic bullet. I try and help visitor the options forum, but, sometimes laziness takes over or it is beyond their comprehension. People should read the books.
Right ...
maglia rosa
Guest
Quote from dreamer:
You haven't done your homework, rosa.
For example, the quote on the S&P 900 call is 26.30/27.50 and the put is 26.10/28.00. For simplicity and discussion purposes, let's say it is 27 on either, that's in the middle.
Selling an option for 27 when the underlying is 900 gives a return of 3% on the strike or symbol price.
Why would I trade the S&P when I can get 10% or more regularly on other symbols??
I apologize. I find I am teaching, or maybe preaching, and I do not want to do either. I will refrain in the future.
You are not teaching anything here, professor.
I like to think in volatility terms when buying and selling options, not in terms of some kind of 'yield'.
What happens to the put price when volatility goes to infinity, sherlock? - Say, for the 15 put, when stock is at 15? The put will be worth $15. Wow, how is that for a 100% return on your strike?
It's great, but only until the next stock tick, when stock goes to 100, how do you like your put sale then?
Of course, you can say, this is all too theoretical, but my point is the option is trading where it's trading because of the market's perception of what vol is.
If you divide everything by 100 in your example you get the S&P trading at $9.00 and the value of the option $0.27. Now you're saying you like to sell an option on another stock that's trading at $9 better, just because it's $1.25 bid for.
So you'd probably also rather buy junk bonds than t-bonds, because they have a greater return, right?
This much for oranges and apples, and good idea refraining from teaching, as your lesson has not taught me anything yet.
FYI
More professonal option traders, (this would be the guys
or gals who have the balls to pony up the money for an exchange
membership and test their skills in the real world), blow out from
being long not short. People who are not in the business
never believe this.
In my opinion there is nothing easy about buying or selling
any kind of derivative including futures and forwards.
I would be extremely cautious in dealing with, or taking advice from anyone who claims such expertise with these products.
Examples include: I make x dollars. Selling premium is easy.
Going long is much less risk. Etc.
I haven't looked at this web site much over the last
6 months. But it is really disappointing that so much of the
information offered here is inaccurate, full of boasting, and just
plain wrong. (At least in my area of expertise). This site is
really a disappointment and I think there should be a disclaimer
on the home page about the accuracy of some of the info. I hope some of you get to read this and it is not erased.
Regarding the statement in P1 above. To the very small percentage of people who understand options and haven't been floor traders you are not included in that comment.
Why is a floor trader a professional and someone who is not
on the floor not a professional. Because, on the most basic level,
and I mean basic level, a floor trader takes positions in 5 or more
stocks all across multiple strikes and buys and sells options
actively for 40 hours a week hedging exposure in a
multitude of ways. Or think of it this way.
Imagine what you know about derivatives now and add to it
5, 10 or more years of experience on the floor of an exchange
where some of the finest, fastest, meanest, shrewdest, traders in the world live their work lives. Imagine watching what happens on the floor of that exchange and to your position
as every expiration approaches and passes. Imagine watching how the order flow evolves in your stocks as expiration approaches or as news hits the wires. Imagine learning how
to work the ny specialist in your listed stocks. This really only
happens from being an active floor trader who is in the game
with other professionals on a daily basis. Sorry.
More professonal option traders, (this would be the guys
or gals who have the balls to pony up the money for an exchange
membership and test their skills in the real world), blow out from
being long not short. People who are not in the business
never believe this.
In my opinion there is nothing easy about buying or selling
any kind of derivative including futures and forwards.
I would be extremely cautious in dealing with, or taking advice from anyone who claims such expertise with these products.
Examples include: I make x dollars. Selling premium is easy.
Going long is much less risk. Etc.
I haven't looked at this web site much over the last
6 months. But it is really disappointing that so much of the
information offered here is inaccurate, full of boasting, and just
plain wrong. (At least in my area of expertise). This site is
really a disappointment and I think there should be a disclaimer
on the home page about the accuracy of some of the info. I hope some of you get to read this and it is not erased.
Regarding the statement in P1 above. To the very small percentage of people who understand options and haven't been floor traders you are not included in that comment.
Why is a floor trader a professional and someone who is not
on the floor not a professional. Because, on the most basic level,
and I mean basic level, a floor trader takes positions in 5 or more
stocks all across multiple strikes and buys and sells options
actively for 40 hours a week hedging exposure in a
multitude of ways. Or think of it this way.
Imagine what you know about derivatives now and add to it
5, 10 or more years of experience on the floor of an exchange
where some of the finest, fastest, meanest, shrewdest, traders in the world live their work lives. Imagine watching what happens on the floor of that exchange and to your position
as every expiration approaches and passes. Imagine watching how the order flow evolves in your stocks as expiration approaches or as news hits the wires. Imagine learning how
to work the ny specialist in your listed stocks. This really only
happens from being an active floor trader who is in the game
with other professionals on a daily basis. Sorry.
Quote from Trajan:
mulriple personalities? All joking aside, how many times have you said,"Read all the books and then ask yourself, 'What do they not discuss?'" I'll rest my case.
I think I usually say read the books, find what they say can only be theoretically done but can't be practically done and then do it ...
trajan and metooxx,
obviously you guys know options, i do not think dreamer has a clue. Seriously, salibas books on options are complicated, easy to write puts/calls or a calendar spread, but condors or butterflies are another story, and they never make sense until you try them..
So with SPX at 900, market no trend, what would you guys write.
Thanx.
obviously you guys know options, i do not think dreamer has a clue. Seriously, salibas books on options are complicated, easy to write puts/calls or a calendar spread, but condors or butterflies are another story, and they never make sense until you try them..
So with SPX at 900, market no trend, what would you guys write.
Thanx.
Quote from stokhack:
trajan and metooxx,
obviously you guys know options, i do not think dreamer has a clue. Seriously, salibas books on options are complicated, easy to write puts/calls or a calendar spread, but condors or butterflies are another story, and they never make sense until you try them..
So with SPX at 900, market no trend, what would you guys write.
Thanx.
No.