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

"Only a poor pricing will lead to a statistical hedge but again it is not inherent..."

Are we talking about using pricing to develop a statistical hedge, or a system that has an edge because it wins in 4 of 5 possible scenarios. I think there is a difference. I believe there is an edge to selling a 2011 put on IBM for $365 that is $35 OTM as oppossed to buying a 2011 call/put that is $35 OTM.

The most intelligent criticism of selling puts deals with risk management and I have learned the hard way about selling options with high IV to collect premium. But I believe when managed properly, collecting premium will be a more consistent income producer than buying premium.
 
Quote from chrismontez:

"Only a poor pricing will lead to a statistical hedge but again it is not inherent..."

Are we talking about using pricing to develop a statistical hedge, or a system that has an edge because it wins in 4 of 5 possible scenarios. I think there is a difference. I believe there is an edge to selling a 2011 put on IBM for $365 that is $35 OTM as oppossed to buying a 2011 call/put that is $35 OTM.

The most intelligent criticism of selling puts deals with risk management and I have learned the hard way about selling options with high IV to collect premium. But I believe when managed properly, collecting premium will be a more consistent income producer than buying premium.
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Well then it means that you believe the option priced in such a way that it may be so. Someone might disagree and if no-one does, well the option price will go down until someone does that's as simple as that. I think there could be a price where even you think it might be better to "switch side".

As for the second part, I agree. Selling OTM options is a statistically advantageous way of getting regular cashflow but when you get bitten, it's a female dog...
 
I wouldn't care about the option pricing as long as the $ taken in on selling the premium on the put makes it worthwhile when looking at carrying costs. For the IBM example, $35 is a long way for it to fall and if it did there is nothing to prevent you from shorting the stock which is the way to protect short puts.
 
Quote from chrismontez:

...and if it did there is nothing to prevent you from shorting the stock which is the way to protect short puts.
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unless you are out of BP...
 
Quote from Dackster:

Mark, are you fucking real!? You don't have to sell options all the time, only when it 'really' suits. Stop being a dick and get a life.



Dackster.
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Mark may be a nice man, but he's a dwarf compared to real options traders like Natenberg, Budwick or McMillan.

Very insecure . .. Thus all the "disclaimers" in his forums and books . .. Rookies this, rookies that . . .
 
Quote from HiddenAgenda:

Mark may be a nice man, but he's a dwarf compared to real options traders like Natenberg, Budwick or McMillan.
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I think you are confused between 'option trader' and 'option educator'.
 
Here's an interesting strategy, and I'm curious to know what you all think:

Examine stock prices over the last 100 years (or some similarly vast period of time) and try to identify the worst 3 month decline in the market over that period.

Let's call it X%.

Then, every day, you simply write lots of 3 month EUROPEAN puts that are (X + a little bit)% out-of-the-money.

It will be an an ongoing money making machine until we experience the worst 3 month decline in history. Bearing in mind it will have to be worse than 1929, 1974, 2008 etc. you could be onto a winner.

What dya all think?
 
Quote from HiddenAgenda:

Mark may be a nice man, but he's a dwarf compared to real options traders like Natenberg, Budwick or McMillan.

Very insecure . .. Thus all the "disclaimers" in his forums and books . .. Rookies this, rookies that . . .
More...




I appologise to Mark, for my remarks made towards him yesterday, although he's probably used to it on this site by now.


'HiddenAgenda'


:) What made you come up with this nick?




Dackster.
 
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