141–150 of 223 posts
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It's not advice for a retail trader; it's advice not to be a retail trader.
It's advice for a retail trader on what they are up against, and it confuses me greatly on how retail traders can look at all of the evidence that they shouldn't, and they still do.
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Do you think that the (often criticized, perhaps way too much) ability to sell naked short is meaningful too?
I've heard this strategy referred to as "picking up pennies in front of a steamroller" - it works until the CEO is discovered to be a fraud, goes to jail, and stock loses 80% of its value in a week. Then you lose everything on a single position. Market makers do this as a free way to cover delta risk in that direction. If you have +100 delta, selling 100 "units" (way out of the money options) is a nice way and doesn'…
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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.
They can also make for a great entry/exit strategy: Want to buy and hold a company but think it's a little too expensive right now? Sell a put, and make risk-free return while you wait. Want to sell that tech stock you've been holding once it doubles? Forget your limit order, that's for the boomers over at vanguard. Sell a call today!
Does anyone else find the trope of journalists using "No, ..." headlines condescending to the point of being counterproductive? It feels like this is meant to give a smug sense of satisfaction to people who already agree and it creates reactance for the people who actually stand to benefit from the alternate perspective.
Anything else is gambling.
[0] measured over the long term.
Does anyone else find the trope of journalists using "No, ..." headlines condescending to the point of being counterproductive? It feels like this is meant to give a smug sense of satisfaction to people who already agree and it creates reactance for the people who actually stand to benefit from the alternate perspective.
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The strategy they are describing (selling covered calls) is actually less risky than holding the underlying. They make more than just holding the underlying when it drops or stays flat, and in exchange they make less when the underlying goes up a lot. Options are just a tool that lets you dial in the amount of risk you want, they can be set up to be more conservative or more risky than the underlying. The latter is w…
Isn't the downside to selling covered calls that, not only do you need to hold the underlying, you can get the option you sold exercised, aka you lose your 100 shares per contract?
But there is no increase in downside in the financial sense (if the stock price declines you keep the premium).
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I've heard this strategy referred to as "picking up pennies in front of a steamroller" - it works until the CEO is discovered to be a fraud, goes to jail, and stock loses 80% of its value in a week. Then you lose everything on a single position. Market makers do this as a free way to cover delta risk in that direction. If you have +100 delta, selling 100 "units" (way out of the money options) is a nice way and doesn'…
If the expected value is positive that means in the long run it should be fine right?
These tail risks are impossible to predict, and volatility of volatility of these events is incredibly high. So your expected value is better to think of as a "very broad range with a positive mean" - are you comfortable with this?
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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.