No, You Aren’t Going to Get Rich by Options Trading • Hacker News Board

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

#31

Post by spywaregorilla » Thu, Nov 10, 2022, 4:04 PM UTC

ramesh31 wrote: post #3

The biggest beginner trap with options is thinking you have 50/50 odds. I'm buying a call or a put, so I have to have a 50% chance of being right, right? Nope. You have a million ways to be wrong, and a very tiny narrow window of ways to be right. You can lose your shirt on poorly executed calls, even if the stock skyrockets. You legitimately have better odds walking into a casino and betting on black than buying cal…

That's... wrong as well. You don't need to have a million ways to be wrong and a few ways to be right. You just need to understand that the world doesn't operate on naive probabilities where each outcome is equally likely.

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

#32

Post by highwaylights » Thu, Nov 10, 2022, 4:04 PM UTC

agency wrote: post #24

logicalmonster wrote: post #16

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 you…

> There are low risk strategies […] that basically guarantee you income for doing nothing Listen to yourself.

You owe me a $10 keyboard. This one’s covered in coffee now.

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

#33

Post by WontGetFooled » Thu, Nov 10, 2022, 4:04 PM UTC

SSJPython wrote: post #27

substation13 wrote: post #23

Earlier quoted context omitted.

> There is nothing wrong with buying low-cost index funds and holding them long-term. That's how you build wealth. Given how prevalent this advice is these days, the indexes are arguably over-priced.

That doesn't necessarily mean people follow this advice. It requires patience and discipline to do this.

A lot of people, like Michael Burry (1), think that we are headed for an index fund crash and they are way oversold.

1. https://www.youtube.com/watch?v=XLGTSzm9iko

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

#34

Post by brink » Thu, Nov 10, 2022, 4:05 PM UTC

I learned this when I got fleeced in the '17 crypto bull and bust. When there's music, it's okay to trade. You're probably going to make money just by accident. But when the music stops, leave immediately, take the bit of money you made with you, and don't look back. It's so easy to stay greedy after the music stops and you're no longer at peak profit. I stuck around too long trying to make it back, lost everything I made and then some. Never making that mistake again.

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

#35

Post by coin » Thu, Nov 10, 2022, 4:05 PM UTC

logicalmonster wrote: post #16

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 you…

> collecting premiums until your target price is met

Until the stock price tanks (for writing covered calls)

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

#36

Post by cjrp » Thu, Nov 10, 2022, 4:06 PM UTC

phphphphp wrote: post #14

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 ins…

"Ah but those guys in the 83% didn't know what they're doing/aren't following the plan I am/haven't done the course that I have". It's a bit like riding a motorcycle and believing that the injury rate is high because other riders are idiots or go too fast or don't wear proper gear, etc.

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

#37

Post by purpleflame1257 » Thu, Nov 10, 2022, 4:06 PM UTC

logicalmonster wrote: post #16

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 you…

Back in the day I used to sell a lot of covered calls on blue chips for this reason. Locking in almost guaranteed small returns that you could churn again and again.

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

#38

Post by MuffinFlavored » Thu, Nov 10, 2022, 4:07 PM UTC

phphphphp wrote: post #14

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 ins…

> 83% of retail investor accounts lose money when trading CFDs with this provider.

How many retail investors think they can be that 17% though?

It creates entire communities. You start following people who claim to have success/an edge but you can't see any actual statistics on their track record unless you put the time in to follow them. Think paid private Discord servers where you are paying for a tip on a winning trade.

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

#39

Post by bell-cot » Thu, Nov 10, 2022, 4:08 PM UTC

jawns wrote: post #9

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…

> I could be wrong but wouldn't simple logic dictate that... most people stop doing something that loses them money? Have you ever been to a casino? Everyone knows that the house always wins in the aggregate , but everyone hopes that they're one of the lucky individuals who will beat the odds and win as an individual . I would guess, in the case of options trading, that it's not the same people being burned over and…

Oh yes, THIS.

And "making easy money" by trading stocks / options / other securities is a far, far better story to tell than "I got lucky at the casino" - which helps lure even more players into the securities casino.

(And, at least in my social group, folks who win or lose at the casino seem to honestly speak of their net gain/loss. Vs. I've yet to hear a single story about making money in securities trading which even hinted at whether the teller's trades added up to a net gain or net loss for the (say) year.)

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

#40

Post by gxs » Thu, Nov 10, 2022, 4:08 PM UTC

highwaylights wrote: post #29

Honestly this is why after dipping my toes into this some time back (along with some very limited time spent in crypto without any kind of derivative shenanigans) I came full circle back to index funds and just putting what I can away at the end of the month. Are index funds going to make me crazy-bonkers-rich? No, but neither was anything else in all likelihood. What they’re brilliant at is giving me my time and att…

It's fun to me to stock pick and I rather enjoy it fully aware of the risks. My solution is to set aside a small amount for this purpose and the rest, as you said, put away into index funds.