I was a broker for a couple of years in the late 80's....absolutely no one made money in options by buying them. The only ones who did OK were the writer of covered calls. This was a long time ago. In the long run all the options "players" went broke; the covered call writers made a small percentage and that was OK because the broker made money too with the commissions. Now.....things are a lot different. It's best not to get too greedy. I think ETF's are safer - they don't expire in a month or two. There were no such things as weekly options in the 80's. I think there were monthly options, six mo. options and yearly options, believe it or not. I was trying to tell Lil Shark that he should paper-trade his options trades for awhile and see how he does.....but I guess he ain't interested. I know this - everyone on this board should be doing very well - if for no other reason the markets have been hitting ALL TIME HIGHS......until the last month or so - then all of a sudden things have change.......but for the last NINE YEARS.....the market has been RUNNING STRONG! How can one not make big money? Agreed.
I'm gittin' ready to go to Church. Talk to you guys later. At least the sun is out in upstate NY and the fall foliage is starting to come in bloom. The Slammer
Sam, no doubt that making money with options is tricky, but a lot things have changed since the 1980's....For one thing, trading costs are way down from the 80's.
When I first opened a trading account back in 1990, I was paying some broker about $100 a trade for his commission....my guess is that options trading had similar high commissions, right?....heck, now a person can do an options or stock trade for just a few bucks....Another thing, back then, I had to place a phone call to my broker to buy or sell anything
...now, those trades can be done in a fraction of a second on a mobile app or from a trading platform on your computer-- I don't have to wait in a queue to speak with my broker....so, I think there is a better chance to lock in profits now than there was back then and with the trading platforms we have now, price is very transparent (with Level 2 and so on) compared to back then...I am still suspicious to this day that my broker back then wasn't giving me the best price or even a fair price or quote....However, I do agree that OPTIONS WRITERS are more likely to make money
only because most options that are traded are either at the money or out of the money...most buyers of options buy them at a low cost premium and bet on the come ...or they are using options as a hedge against their stock shares to protect against down-side (or upside if they are shorting a stock)....so, for this reason, most options do expire worthless and the seller of those options pockets the money....So, in my own experience
, when I am actively trading (meaning the day job isn't consuming a lot of my time), I have proven to myself that I can run a profit with options trading...but the strategy here is to think like the WRITERS of options....either I sell options (those covered calls you spoke of) or if I buy them, I buy my options in-the-money and/or with longer expiry dates, which are the options that WRITERS tend to make fewer profits on....so, again, this has been the lesson I learned over several years of options trading....think like the SELLERS (Writers) do
....and I think you can make money with options even if you are buying them, but of course, you still have to time your entry and exit properly too ...(and this is where I have to limit my trading during busy periods at the day job, otherwise, I can't properly time my entries and exits nearly as well)...Or, become a writer of options
, but for most retail traders, this requires selling a covered call which means you have to buy 100 shares of stock for every options contract you sell...or a person can also sell puts but keep in mind that your broker will freeze your account for an amount equal to the strike price...so, for example, a few months ago, i sold a put on an oil stock (BPT) with a $30 strike price and my broker froze $3,000 of my sweep account to cover the cost of selling that put. But options are also useful tools for protecting your investments in stock shares
....As an example, I used them successfully earlier in the year when I rode SQ
up from about $28 to $65 with 100 shares of stock...I kept buying an occasional cheap put to protect my downside....and as I recall, my put finally allowed me to exit the SQ trade successfully just shy of the $65 mark...I think around $62 or so (although I missed the next move up which took SQ up toward $100, but that was only because I wasn't focused on that stock after $65)...currently, I own two puts on NIO
that I bought at a $7 strike after I paid over $8 for NIO...now, NIO started to rally late last week and it might come back to $8 or more, and that would make me happy...but if that doesn't happen by November 16th, I can exercise those puts and exit my 200 shares of NIO at $7 rather than some beaten down price like $5.50 or worse.. Sam, overall, I agree with your comments about options trading
...they are tricky devils and if a person is not thinking like the SELLERS of those options, then they will surely lose money over time. So, that's my point with options...think about what the goals of the SELLERs (WRITERS
) are and then buy those options that the writers would prefer you not buy...they still have to sell them to you in order to create a liquid market, and I would venture to say that most in-the-money and long-dated options are sold by the big brokers like Goldman Sachs (click here to learn more!)
, the House of Morgan, or by Berkshire Hathaway (Warren Buffett) [click here to learn more]
as most retail sellers of options (and those numbers are very small, incidentally) do not want to sell you ITM or long-dated options, as those are the ones they are more likely to lose money on. Incidentally, I do think that these days, most SELLERs of options make a good income off of them
....this is a major reason that Goldman rarely ever has a losing day of trading, because they are selling a lot of options against the stock shares they own...and look at Warren Buffett...he has admitted that a large source of Berkshire Hathaway's income comes from the sale of options contracts....THINK OF THAT OLD BOARD-GAME, MONOPOLY
...The winning strategy of that game was to buy a lot of properties and put hotels and houses on those properties and then charge HIGH RENT everytime an opponent landed on one of your properties.....WELL, the big institutions do the same thing with Options....they buy up most of the stock shares out there in the market...and then they collect RENT while they hold those shares by either LENDING the shares out to the shorts (and collecting interest on the margin loans) or by collecting dividends on those shares and selling options contracts to the sheeples...it's RENT to them...just like in MONOPOLY! They don't care if the stock shares go up or down...they have it figured that they are making money regardless of the direction of the stock shares.