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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

#151

Post by mikestew »

logicalmonster wrote: post #48
agency wrote: post #24

Earlier quoted context omitted.

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

What is your issue with my comment? What I said is true. You can essentially guarantee yourself an income. The risk comes from anytime you're holding stock and the stock value decreases, but you can sell calls on that and earn an income on that until a company goes out of business. This type of wheel strategy is inherently less risky than merely buying stock. There's obviously a lot of nuance to even simple options t…

...but you can sell calls on that and earn an income on that until a company goes out of business.

...or the buyer of the contract exercises the option. And yes, there's a lot of nuances, there exercise of options being just one of the nuances. That's why "you can essentially guarantee yourself an income" simply isn't true. Starting with the obvious fact that if it were true, everyone would do it.

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

#152

Post by logicalmonster »

hristov wrote: post #136
logicalmonster wrote: post #130

Earlier quoted context omitted.

Please explain how so. If you buy the stock outright: you can lose everything if the company goes out of business. If you use a simple wheel, you can still lose everything, but the blow is blunted by any premiums you collect.

If you use a wheel, you will lose more on average. You will be guaranteed to sell below market value and to buy above market value. Yes, with the wheel you may end up with a little bit of premiums if your stock goes to zero, but in most cases you end up worse with the wheel than owning a stock. That is because, when you own a stock you buy it at market and when you decide to sell, you sell it at market. With the whee…

> If you use a wheel, you will lose more on average. You will be guaranteed to sell below market value and to buy above market value.

I'm not understanding your comment. Who is forcing you to sell below market value and buy above market value?

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

#154

Post by mikestew »

...that a game of Russian roulette wouldn’t be so thrilling if you found out it was a full clip.

Pro tip: don't play Russian roulette with anything involving a "clip" (more accurately: magazine) and even a single bullet[0]. "Revolver" is what you're looking for here.

OTOH, perhaps it is a fitting metaphor for amateurs trading options.

[0] Spoiler: a magazine-fed firearm with even a single bullet in it will feed that bullet right to your brain when you pull the trigger.

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

#155

Post by mikeyouse »

alangibson wrote: post #153

I read a lot of positive opinions in this thread about index funds. Consider for a minute how much money has been flowing into My guess is that we're about to see a bubble pop over the coming recession that no one realized was there.

There's very little money "flowing into" the companies on the S&P500 by virtue of their inclusion. Buying a share of Coca Cola doesn't give money to Coca Cola, it gives it to the previous 3rd party owner of that share. With the exception of new share issuances like IPOs, the share price of a company is mostly irrelevant to the cash position of that company.

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

#156

Post by MuffinFlavored »

alangibson wrote: post #153

I read a lot of positive opinions in this thread about index funds. Consider for a minute how much money has been flowing into My guess is that we're about to see a bubble pop over the coming recession that no one realized was there.

> no one realized was there

but we have data that S&P500 P/E has been elevated compared to history for quite a while

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

#157

Post by MuffinFlavored »

BitwiseFool wrote: post #143

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.

I think the argument here is the alternate perspective (yes, I, a retail trader, could hypothetically turn a profit via options) isn’t realistic/viable.

Who here can prove it wrong? :/

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

#158

Post by charlieyu1 »

belter wrote: post #95

Except if you are Hillary Clinton ;-) https://en.wikipedia.org/wiki/Hillary_Clinton_cattle_futures... "Her initial $1,000 investment had generated nearly $100,000 (equivalent to $373,360.84 in 2021),when she stopped trading after ten months." I know...futures not options.

I’m pretty sure that the futures market has a prohibitive cost of entry to general folks. It is not something you can do for $1000.

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

#159

Post by MuffinFlavored »

jeffreyrogers wrote: post #148
MuffinFlavored wrote: post #140

Earlier quoted context omitted.

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?

Yes, so the upside is capped but you get to set the cap based on what call you sell. The bet you're making is that the stock won't appreciate enough for the other party to exercise the call option (so you earn the option premium + underlying appreciation). If the option is exercised you lose some of the gains you would otherwise have made, but you still captured some of the appreciation. But there is no increase in d…

but if I hold the underlying long in the first place, I’m bullish in it, and I don’t want my shares to be “called/exercised” away from me, no?

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

#160

Post by mikeyouse »

logicalmonster wrote: post #130
hristov wrote: post #126

Earlier quoted context omitted.

Wrong, it is inherently more risky. You are fooling yourself.

Please explain how so. If you buy the stock outright: you can lose everything if the company goes out of business. If you use a simple wheel, you can still lose everything, but the blow is blunted by any premiums you collect.

Many option bets have uncapped losses.. If you buy a share of Coca Cola for $60, you could lose $60 if the company goes bankrupt. If you sell a naked call to earn the premium, you can in theory, lose an infinite amount of money.
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