zupcon said:
Its pretty obvious where your leading with this, and for the record I have to say that its rather appalling behaviour to hijack a thread, take it off topic, then completely refuse to engage in any debate on the basis that you claim to be breaking the rules of an elite club.
Im sure that many here will assume that your using your membership of S3.4 as rather a lame excuse to avoid answering those rather awkward questions where you suddenly feel a little out of your depth.
If you where actually prepared to engage in an intelligent argument this could have the makings of a decent thought provoking thread.
Ive said it before, and I'll say it again I dont trade options so my thoughts are totally inconsequential, and should be of interest to no one. I will however answer your questions.
Personally if I where attempting to devise an option strategy Id probably be tempted to focus on option 3, but with a very clear understanding of the risk management issues. Personally I'm of the opinion (based on 10 minutes thinking) that there are only 2 ways to gain an edge in options trading. Firstly, to gain an edge by identifying mis priced options, and this opens up a whole can of worms that I'm not qualified to comment on, and would involve me going head to head with the brightest and largest competitors in the business. Its probably achievable, but if all you want to do is make money, the whole derivatives thing adds a layer of unnecessary complexity.
The second method of gaining an edge, is by using the strategies that your advocating. I (like the majority for I am indeed a stupid fool) believe that the writer has no inherent edge over the buyer from a purely mathematical perspective. It is possible to obtain an edge, but that edge, is obtained through appropriate risk management.
Edge is a complex subject, and perhaps goes a little further than just basic mathematics, for example the psychological benefits of high win rates shouldn't be underestimated, and might be considered a component part of a traders "edge", writing may provide you with greater flexibility, you may have a closer relationship with your broker, plus a million and other little things that all add up to form part of an edge, but thats a matter best discussed elsewhere.
I suspect most option traders would opt for option 2. Before commenting further on this, one thing that I would be interested to know is what percentage of the options market is comprised of speculative traders, and what percentage are using these instruments simply to hedge. If Im buying options as a form of low cost insurance, then my perspective on an option expiring worthless will be very different to someone trading on a purely speculative basis. I think this is quite an important point that you've failed to recognise, and any statistics quoted need to be examined in this particular light.
With respect to which makes money consistently, its quite obvious, but as 1001 people have already pointed out, time after time, focussing on the rewards, without a complete and detailed understanding of risk is rather irresponsible.
I apologise to any options traders reading my grossly simplistic opinions, and would appreciate comments from those who actually understand options, such as Grant, A Dashing Blade or PT. Perhaps then I and others might actually learn something from the exercise.
regards
xup
You see Zu, I have in the past presented many facts about trading Stocks, and during that time I also briefly mentioned that I have an interest in Commodity & Index Options, as well as some Futures Contracts.
Now, here I am again, stating some FACTS, and again, for some unknown reason, many attack with silly remarks like I know nothing about what I am talking about.
Remember, and I will state it again, right now, for the umpteen zillionth time, I KNOW NOTHING ABOUT ANYTHING.
But, I am very good at recognising
FACTUAL INFORMATION when I see it, and the reason I am so good at doing this, well, it is because of the way I think - remember that little thread that you all got relegated to the position of "absolutely nothing to do with trading", what a JOKE.
It goes something like this:
Ask and you shall receive.
But, I cant give more than I'm allowed to give. Unfortunately I cant read all of your minds. I have answered more questions than most, I think, and I have also put more questions than most!
The thread title is "Options edge (Writing Vs Buying)".
I can only presume that Profitaker means trading options for gains purposes - btw, is he back yet, for he seems to have disappeared from the face of the planet,
maybe he was blasted into space by the "7+ standard deviation extreme move" :cheesy: I dont think this thread is for options hedging purposes. Oh, and thanks for bringing up this very important point we are now discussing and debating.
Sorry to hear you know very little on Options but, without asking you are never going to get far in derivative trading. I have to keep to the rules imposed by Elite 3.4s club, as the penalties are severe - ranging from 1 month to 6 month ban, plus there are fines that go as high as £5K, and if the fines are not paid in one month, my membership is cancelled for life.
So, you see I'm risking much with my posts on here. The object of this exercise is to establish how big is the majority and how small is the minority, and more importantly, how they think. Most dont like to think because they use others to think for them. The cycle continues in all markets, it is the same no matter where you go, so you must speak with those that know best - no other way, for if you rely on learning from textbooks only, well, need I say anymore at this stage!
Regards,
