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

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

#101

Post by rexreed »

lisper wrote: post #88
rexreed wrote: post #69

This will sound super basic and maybe even trite, but the way to get rich is to hold assets that increase in value. I know it's stupid and basic, but that's the way. Assets could be hard like physical assets or real estate, but those assets trade long-term potential for asset value growth with liquidity. The best assets are the ones that not only increase in value at a significant rate, but also provide cash / income…

> Venture capital doesn't invest in businesses. It's the biggest head fake there is. They invest in assets, high risk, fast growth assets. That's a bit too facile. Yes, VCs invest in assets, but the assets they invest in are businesses and not, say, commodities or derivatives or options, which are also high-risk and (potentially) fast-growth assets. VC's invest in businesses, but not just any businesses. They want bu…

But they don't actually invest in businesses. Yes, the asset happens to be an operating corporation. But the actual business of that corporation is not what they invest in. They're not interested in portions of revenue or profit sharing. What they want is the asset to increase in value, and that asset is their preferentially protected share ownership of the corporation. Whether or not the business is a true business (as in with actual revenues or profits) does not materially matter to VCs, unless that is directly correlated to asset value increase. Perhaps another way to say it is: VCs invest in corporations, but they don't invest in businesses. It took me a long while to realize this, but once you do it all clicks.

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

#102

Post by CSSer »

spelunker wrote: post #82
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…

Options in particular are a trap IMO because they require a LOT of active attention to the market day to day, and in the end aren't really worth it. I also dabbled in options a while back, and ditched them after losing much more than I should. I did learn a lot about the stock market while doing options though, so I guess that is a plus.

Your point about the attention required was my takeaway too. I traded paper in college for awhile out of curiosity, and I made a decent amount of "money" doing it too! I was surprised by this because I thought the stock market was insanely difficult to understand and constantly unpredictable beforehand.

It was like that but not as often as I expected. For example, intraday movements could often happen at very predictable times. It can also be very cargo cult. Things like technical analysis seem to work (until they don't) only because enough people believe they will, so the signal to noise ratio can be very hard to suss out.

Ultimately the time required and risk tolerance for those moonshot chances just didn't add up.

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

#103

Post by MuffinFlavored »

LanceH wrote: post #49

I'll sell options on underlying boring securities. I may cap my short term gains to 15% or so, but I'll get an immediate couple of % points several times a year. it turns a boring blue chip into a less boring blue chip, but going from 8% to 12% is no joke.

Now talk about the times this strategy hasn't worked/the inverse (loss instead of profit) has happened to balance it out so it doesn't sound too good to be true :)

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

#104

Post by spacemadness »

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…

The reasonable approach to options, if you’re not trying to go crazy speculating, seems to me to be hedging strategies. Or selling options to take a little each sale if you don’t mind the somewhat lesser risk dependent on the type of market at play. All that said, that’s my armchair take as I don’t mess with them outside of Wall Street Raider.

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

#105

Post by ISL »

vgt wrote: post #72
NovemberWhiskey wrote: post #28

The way to get rich by options trading is to make a market in them, to aim to be as neutral as possible on your greeks and to take bid/ask spread, and to do this with extremely high-quality real-time risk analytics systems, first-line trading oversight and second-line risk management oversight. In other words, it's to be an equity volatility trading desk.

(I worked in equity options market making in the past) I'm not sure this is such a good idea. Professional companies that do equity options market making have major natural advantages over you: - They are at the front of the line of any order if they're on the NBBO, so they're going to capture the spread - They get order flow from offline brokers, which tends to be high volume and have higher edge - They do gobs of v…

I think GP was suggesting, gently, that one not expect to surpass the professionals.

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

#106

Post by pmoriarty »

horsawlarway wrote: post #75
MuffinFlavored wrote: post #67

Earlier quoted context omitted.

That is one way/the best way to make money options trading. Is there any wiggle room in that statement for the alternative? If retail options traders come out ahead winning overall 15% of the time... is that worth pouring time into? It becomes a personal decision on whether you should risk your resources/time given those odds. The question I have is... why do some people win and some people lose? It can't just be luc…

I mean... It really can just be luck. Even the absolute rock star traders have a nasty habit of regressing to the mean on a long enough time line. It just turns out that when you have a several million participants - some of them have "a long enough time line" of 30+ years.

"It really can just be luck"

...well, luck or insider trading.

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

#107

Post by spacemadness »

Not to disparage the article here, just more of an observation in the trend of “now you tell me” financial journalism. I wish these types of articles would surface more at the times people need to hear them instead of after a bubble bursts. It’s easy to take a stance when the mood has turned, but I don’t remember these articles surfacing much during the last height of stock speculation last year. I have no data to back that up so it could be my own biases at play.

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

#108

Post by SV_BubbleTime »

matwood wrote: post #60
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…

Selling covered calls is a way to make money with the risk of capping your upside. QYLD is an ETF that does this for you. https://finance.yahoo.com/quote/QYLD

The 5y doesn’t look so hot on that.

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

#109

Post by docandrew »

I understood that options trading is zero-sum: to win, someone else has to lose. In this sense it’s like gambling, also in that the house always wins because they collect the fees no matter what. Like gambling I’m sure there are plenty of people with success stories too. Is this assessment wrong?

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

#110

Post by lijogdfljk »

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…

Recommend any reading to learn index funds?
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