Well, now I'll have to know Greeks

Quote from Arnie Guitar:

Um, you can't stop time, it's always moving in the favor of the writer.

To sum up, I believe the way most OTM writers feel,
Of the 4 things that are happening,
Writers have 3 of them that are good;
1.Time decay
2.Underlying stays put.
3.Underlying moves away.

Buyers need 1.
The underlying has to move in their favor, usually in a big way.

Writer, 3 positives, 1 negative.
Buyer, 1 positive, 3 negative.

I think that's why people write.
More...


Arnie , learn the greeks first and then reread your last post ; I wonder if you will change your opinion then
 
Continue your analysis further:
-if writing is more profitable, more traders will decide to sell options than to buy them
-if the supply increases, the options' prices will go down
-as options' prices decrease, at some point it will be as profitable to buy as to sell them
-here'll be the point around which the market prices will gyrate, where the implied volatility'll settle

In my opinion the people who write options because it's more profitable to "write" them are misinformed.
Quote from Arnie Guitar:

Um, you can't stop time, it's always moving in the favor of the writer.

To sum up, I believe the way most OTM writers feel,
Of the 4 things that are happening,
Writers have 3 of them that are good;
1.Time decay
2.Underlying stays put.
3.Underlying moves away.

Buyers need 1.
The underlying has to move in their favor, usually in a big way.

Writer, 3 positives, 1 negative.
Buyer, 1 positive, 3 negative.

I think that's why people write.
More...
 
There is a time to write and a time to buy...a time for otm and atm... to decide to be only a writer can keep you from a wonderful opportunity to buy a cheap option and make a killing..... and NEVER to write will perhaps keep you from a high probability trade that will give you "pocket change". The key is to be flexible in your thinking and the goal is to recognize an opportunity when it happens whether you are a net buyer or seller of premium, then to use the option which will give you the best return on risk.

edit: easier said than done:p
 
Arnie, Arnie, Arnie
"Great, a National Holiday and this guy's got me looking for a rope and a tree......."
You are missing the point, again.
My comments were meant to get you thinking about the way you trade and perhaps consider other choices since the ones you are using currently aren't getting you what you want (by your own admission).
We are now back at square one and the old chestnut of "is it better to buy or is it better to sell options" has been resurrected. The answer is - both methods work in the right hands. Furthermore, your claim that people write otm options (say a put) because of xyz reasons means that you don't understand that buying an itm option (say a call) of the exact same strike as your written otm put, and expiry has the exact same greeks, risks etc.. This is a basic concept and you're still not getting it.
I think you really do need to learn a bit more because you don't seem to be able to understand the crux of what others are posting, e.g. mte's posts.
Good advice from iv trader: "Arnie , learn the greeks first and then reread your last post ; I wonder if you will change your opinion then"
Daddy's boy

cnms2 - great link, lol.
 
Quote from Arnie Guitar:

Um, you can't stop time, it's always moving in the favor of the writer.

To sum up, I believe the way most OTM writers feel,
Of the 4 things that are happening,
Writers have 3 of them that are good;
1.Time decay
2.Underlying stays put.
3.Underlying moves away.

Buyers need 1.
The underlying has to move in their favor, usually in a big way.

Writer, 3 positives, 1 negative.
Buyer, 1 positive, 3 negative.

I think that's why people write.
More...

I don't know if you're doing this on purpose or you're just so dumb that you do not understand the point I was trying to make.

You said:
Quote from Arnie Guitar:

I've asked myself that question many times.
I think it's the mentality that money is in your pocket right away,
as opposed to "hoping" a position will go up in value.....
More...

So once again, the money is not in your pocket. Unless you can buy that option back for less than what you sold it for you got ZERO profit. You're still "hoping" the position will go down in value. The means by which the position goes up/down in value are irrelevant here. So save your lessons on how various option positions behave.
 
Quote from Arnie Guitar:

Writer, 3 positives, 1 negative.
Buyer, 1 positive, 3 negative.
More...

Well, actually a buyer of gamma profits from ANY moves in underlying as well as profits from increases in implied vol. Seller profits from lack of moves and from passage of time. 2 vs 2. If there is a reason you think that being short gamma is better, it's mostly the gap risk.
 
:D :cool:

I still just think that dummies like me who don't know greeks,
who are a little intimidated by them because it just doesn't sink in,
justify OTM writing by the reasoning I offered, right or wrong.
When you write OTM, of the three things the price of the underlying can do, two are good. So they figure the odds are in there favor.
I also think they prefer writing OTM puts rather than OTM calls because of what I call "compression protection", in their minds, they feel it can run away to the upside, but downside has compression protection; in the case of equities, there are the real estate holdings, buildings, equipment, etc.
But yes, I know it can still go to zero.

I know the reasons I've offered can be shot full of holes,
but I think it is the rationale people like me use,
right or wrong.

Just my opinion.
 
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