What I mean is you have a much higher exposure as a percentage of your outlay in options trading. I follow Max's journal regularly and I was just saying that when you already make money playing price moves, options don't offer a lot more for price exposure. And when they do, you're taking on a higher risk of loss, but a lower absolute risk. But in the aggregate, your losses on a long options portfolio would be slightly higher than if you traded the shares directly, or your gains would be slightly lower.Frankly I don't understand your comments.
To me if you go long on options, it is higher risk (low probability) but higher reward (unlimited gains) because of the leverage. Lower risk (high probability) but lower reward (limited gains) if you go short and do buy-write.
In my opinion, options are zero sum games, if you win someone has to lose. And the net sum is in the long run we all lose because of commissions and slippages?
But just like day trading, though a small mom and pop, I still hope I can take money from all you elite option traders.
Regards,
Read this: https://seekingalpha.com/article/4025862-flat-using-options-data-predict-future-prices
That's about the most useful discussion of using options to price the underlying that I know of. Whenever I make one of those calls with a ridiculous range of +/- 0.02 for a Friday close, it's looking at options to see the underlying's likely movement. ( SQ 26.50 before earnings was an exception to that--that was fairly straight forward fundamentals / outlook with a little luck)
Beyond that, there's certain patterns I look for when I trade options. It takes some getting used to and scrolling back and forth between expiry, but you get to the point where you can spot the spreads and the calendars.
At the moment, there's not a ton of good examples of this because earnings season is going to cloud the numbers for the Aug monthly expiry, and there was a lot of Thursday / Friday volume on these with the NK mess.
One I noticed today is the DAL Sept $55 call (I'm long the Dec $55 call at the moment). This is most likely a bearish position (covered calls) because the volume was high when the price was decreasing (with the biggest day at the DAL peak). So, retail is short on this, which means market makers are long. Unfortunately, this won't generate the same buying and selling pressure that it would if the market makers were short. But the imbalance here is probably enough to suggest a little buying pressure towards $55.
But look at the Aug $50 call. Most of the volume here was on 7/27--if you recall, that coincides with my bullish call on your thread (7/31 - 2 trading days later). Presumably, this is a speculative bullish position, which means market makers are short, which means as they hedge, the price will tend towards $50. There's a pretty good chance we'll finish the week out at $50 +/- 0.10. There's a pretty good chance that I'll be shorting the 50.50 call tomorrow as the short half of a diagonal.
So, price expectancy on this is neutral for the week, and quite bullish from next Monday. Looking to the 8/25 chains gives a tacit confirmation here. The open interest on that looks like put spreads covering 50-50.50, and call spreads over (oddly) 51-56--this could be a broken-wing condor too. So the market is looking for a 1-2% upside next week from a presumed Friday close around $50...though, I'd discount the next weekly on this one because open interest (~1,100 on any one leg) represents only 110k shares or about 2% of daily volume....not enough to move the market. But Friday has 1.3 million shares in play, about 1/4 daily volume--that's enough to move the market and center it on one price.
We'll wait till the week ending 9/8--that will give us a very strong indicator of price movement because we'll have a weekly expiring 1 week before a quarterly--those give some of the strongest indications because you have market moving volume in both.
I'll try and point some of these out as I see them. Zany pointed out the GS call volume ($250 Sept calls) representing nearly 1.8 million shares. I actually opened a speculative $240-250 call debit spread following along on this one because these appeared to be unsupported speculative buys--meaning as the price approaches $250, market makers will have to pick up a TON of shares to cover their obligations should this one go ITM.
