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No, You Aren’t Going to Get Rich by Options Trading

jacobin.com

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Re: No, You Aren’t Going to Get Rich by Options Trading

#11

Post by jevgeni »

The first sentence already misrepresents its source.

Jacobin claim: "As of this August, ordinary investors, [...], have lost everything they came to the market with during the pandemic." [source: Business Insider article]

Business insider article: "Retail traders have now lost all the money they gained during the pandemic, according to Morgan Stanley"

So no, Jacobin, they didn't loose everything they came to the market with, but they have lost all the profit in a limited span of time.

Re: No, You Aren’t Going to Get Rich by Options Trading

#12

Post by millzlane »

MuffinFlavored wrote: post #2

> My position, to be clear, is not a patronizing one that posits people can’t do as they please with their money, but rather that a game of Russian roulette wouldn’t be so thrilling if you found out it was a full clip. Might I suggest to the author posting some evidence/data that shows retail options traders getting burned? Burned in the sense of having no returns to speak of. Obviously, they're getting burned on bad…

Ludomania is the answer you seek.

Edit also this: https://link.springer.com/article/10.1007/s10899-016-9659-x

Re: No, You Aren’t Going to Get Rich by Options Trading

#13

Post by Cpoll »

robotnikman wrote: post #8
MuffinFlavored wrote: post #2

> My position, to be clear, is not a patronizing one that posits people can’t do as they please with their money, but rather that a game of Russian roulette wouldn’t be so thrilling if you found out it was a full clip. Might I suggest to the author posting some evidence/data that shows retail options traders getting burned? Burned in the sense of having no returns to speak of. Obviously, they're getting burned on bad…

My theory is people are seeing the 'winners' post their gains on social media (like reddit /r/wallstreetbets) and so they try and go in and see if they can do the same thing. A lot of these people are in experienced and may not know what they are doing, with many losing money in the process

/r/wallstreetbets was a weird one because there were so many 'winners.' I think on a smaller scale there's a survivorship bias too. In that sense, it's like deciding to play Russian roulette with a full clip because you saw the gun misfire for someone else.

Re: No, You Aren’t Going to Get Rich by Options Trading

#14

Post by phphphphp »

MuffinFlavored wrote: post #2

> My position, to be clear, is not a patronizing one that posits people can’t do as they please with their money, but rather that a game of Russian roulette wouldn’t be so thrilling if you found out it was a full clip. Might I suggest to the author posting some evidence/data that shows retail options traders getting burned? Burned in the sense of having no returns to speak of. Obviously, they're getting burned on bad…

You're trying to find rational behaviour in gambling: most gambling is not rational. I don't know of any statistics specific to options, but there's other financial instruments, like CFDs, that have heavy regulations in some countries because of how much people lose: options will probably go that way, too.

For example, if you visit Trading212 and try to use CFDs, you'll see the following warning:

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 83% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high riskof losing your money.

And yet, Trading212 make huge amounts of money off-of CFDs, despite it being legally required for them to tell people that they will lose their money.

Re: No, You Aren’t Going to Get Rich by Options Trading

#15

Post by bombcar »

Cpoll wrote: post #13
robotnikman wrote: post #8

Earlier quoted context omitted.

My theory is people are seeing the 'winners' post their gains on social media (like reddit /r/wallstreetbets) and so they try and go in and see if they can do the same thing. A lot of these people are in experienced and may not know what they are doing, with many losing money in the process

/r/wallstreetbets was a weird one because there were so many 'winners.' I think on a smaller scale there's a survivorship bias too. In that sense, it's like deciding to play Russian roulette with a full clip because you saw the gun misfire for someone else.

A decent amount of WSB posts used to be "got rect" also, whenever the market moved the other way.

Re: No, You Aren’t Going to Get Rich by Options Trading

#16

Post by logicalmonster »

You're probably not going to get instantly rich doing any kind of options trading. The story of an average guy who randomly makes a big bet, times the market perfectly, and quickly turns a few thousand dollars into a few million happens once in a while, but is incredibly rare.

That said, some kind of options trading can be less risky than just holding stock because you can do things like collecting premiums until your target price is met. There are low risk strategies like the wheel that basically guarantee you income for doing nothing but being patient.

Re: No, You Aren’t Going to Get Rich by Options Trading

#17

Post by blamazon »

Cpoll wrote: post #13
robotnikman wrote: post #8

Earlier quoted context omitted.

My theory is people are seeing the 'winners' post their gains on social media (like reddit /r/wallstreetbets) and so they try and go in and see if they can do the same thing. A lot of these people are in experienced and may not know what they are doing, with many losing money in the process

/r/wallstreetbets was a weird one because there were so many 'winners.' I think on a smaller scale there's a survivorship bias too. In that sense, it's like deciding to play Russian roulette with a full clip because you saw the gun misfire for someone else.

There's been just as much, if not more, 'loss porn' on that subreddit. I think people just upvote the extremes. The middle of the bell curve is uninteresting: "Take it to /r/investing" as they say.

Re: No, You Aren’t Going to Get Rich by Options Trading

#18

Post by giantg2 »

MuffinFlavored wrote: post #2

> My position, to be clear, is not a patronizing one that posits people can’t do as they please with their money, but rather that a game of Russian roulette wouldn’t be so thrilling if you found out it was a full clip. Might I suggest to the author posting some evidence/data that shows retail options traders getting burned? Burned in the sense of having no returns to speak of. Obviously, they're getting burned on bad…

To me, the big draw to options during the pandemic is that nobody knew what would happen. Normally, the little guy gets completely screwed because of information asymmetry. In that sort of environment it's more of a level playing field. Sure, cost were fairly high, but so was the volatility. It at least felt like you had more of a chance than normal. I had one option that I sold at break-even that would have 30x'd to $30k if I just held it two more months. That's a bigger potential gain than anything I'll ever see again, unless I play the lottery.

Now it feels like there's no point to options because things are more stable and the big guys have better intel. I might as well play the lottery - clear odds, no insiders, and less manipulation.

Re: No, You Aren’t Going to Get Rich by Options Trading

#19

Post by bombcar »

girishso wrote: post #7

As far as I know, options writing is how one makes money in options in the long run. Maybe experts can share their thoughts.

You can sell puts and calls, and you CAN maybe come out ahead but it's hard to do after fees and taxes.

However, fun fact, certain retirement accounts let you sell puts and calls.

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