As a newbie learning along the way about option trading, I sadly find out that it's not really possible to sell options for a small starter investor. With an account barely satisfying the daytrading rule, I found whenever I want to sell/write some options, I can only sell 5-7 contracts, some times at most 10-15 contracts. Given the price of the out-of-money option is often only 5 or 10 cents, I really don't generate much income by selling options. I am frustrated, because experts say options are used to be sold, not be bought. But now I am frustrated. Please shed some lights on me. Thank you!
Too bad, options are not soldable...
- Thread starter mizhael
- Start date
Sure it is, but are you sure that's what you want to do?
1) selling NAKED options is riskier than you think it is.
2) Selling options at prices of $0.05 and $0.10 - which is what you are doing - is another insanity. Guaranteed to be a long-term losing strategy.
3) As a rookie, why are you so interested in beginning with a very risky way of making money? Save naked selling until you have much more experience. And if you NEVER adopt that strategy, you will be far better served.
Mark
Which "experts". Could you provided a link?
forex-forex
The Trading GURU
Quote from nazzdack:
You have to get "it" out of your head that out-of-the-money option premiums are "free money".
To Mizhael:
Write nazzdack's reply 100 times.
Then read it 100 times.
If you intend to sell options, it makes a big difference which options you sell and how you manage the risk.
Mark
If you are truely a "Starter Investor", selling options the way you mentioned is NOT THE RIGHT MOVE! It will kill you account very fast.
All you will do is pay commissions, that will not keep up with your profits.
Take it slow. If this was driving a car, why would you want to start in a Formula One car, before knowing, and getting the necessary EXPERENCE first.
For starting out find a good index option (QQQQ, DIA) and track it, then daytrade it. That is BUYING a block of options (no more than 30% of your account balance), then re-sell it after a rolling move has been made.
(check out my thread here).
Another option to try would be a Credit Spread trading.
Hey at least he did not read my guaranteed to make money in options idea
