Whether an options writer or buyer has better edge? Why?

Quote from xflat2186:



The original question was about any “edge” either side has and the definitive answer is NO, there is no inherent edge in buying or writing options.
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Right, this seems to be a tough point to get across here! People here seem absolutely determined to believe there is an inherent edge in one strategy vs another.

I guess people have some need to believe there's a holy grail - the perfect option strategy - the one that's a winner no matter what!
 
Quote from paysense:

I think I have found a way that beats even the best hedge funds over time.

Yes, you must avoid the black swan. Just because you do not know of anyone with an inherent edge doesn't mean that none exists.

Write the options and keep a rein on drawdown. The compounded monthly return will eventually overtake and exceed the market.

Interestingly, do a search on the net and NO site can truly show it has done this over multi-year periods.

Perpetuate this for years and you've got winner.

This other gent you mention has about a 20% APR - aside from the one anomaly. Just the fact that the one was so beyond the rest - raises doubt on management.

Also the out-dated copyrights of the documents makes one leary, too. Ultimately even this achievement is/may be a "failed" (can't perpetuate) venture.

Pay$
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Most success stories aren't plastered on websites. I know a few successful traders who have done anywhere from 4 to 15x on their book in the last 4 years on large accounts and trading nothing but volatility.

Sorry, but none of it involves writing covered calls.
 
Quote from college_trad3r:

Writing options is like creating counterfeit stocks out of thin air. The option there-after exists, but if the original writer buys it back the option is then neutralised. And net neutral like the futures.

Therefore I agree with your statement. Do you have an options blog?
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I do have such a blog:

http://blog.mdwoptions.com/

Mark
 
Quote from dmo:

Even if it were true, it would mean nothing. There's also the matter of how much you make on your winners vs how much you lose on your losers.

If you make money 4 times out of 5 - but that 5th time you lose ten times what you made the other 4 times - you'd still be a loser.
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And that's why the buyer can be naked long, but the writer should hedge.

Mark
 
My answer is that it's obvious that the seller of the option has an edge provided he/she is allowed to not mark to market. It's obvious because that's precisely the business model of insurance companies and insurance companies are, generally, profitable.

Fundamentally, people who mentally do mark-to-market tend to overprice risk premium (generally, people are irrationally risk-averse), which means options, i.e. insurance policies, are structurally expensive. So the seller has an edge.

On a side note, above reasoning is also why I think Taleb is full of sh1t...
 
Quote from short&naked:

Name a fund or trader who has beating the market over a 20 year period, writing or buying options... can't do it.
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Warren Buffett. He sells puts all the time.

Not sure if there is any particular "edge" one way or another in simple buying or writing, but I prefer to write. Think of options as insurance...usually the guy who sells it makes money.
 
I have been an option seller for the last 2 years, I believe that writing has an edge.

Option is a zero sum game, if you do not have an edge in selling them then you should have an edge in buying them.
Question: have you never met one single option buyer who could make money consistently ?
 
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