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

#221

Post by ivanche » Mon, Nov 14, 2022, 12:52 PM UTC

chollida1 wrote: post #218

ivanche wrote: post #216

Earlier quoted context omitted.

The problem with this line of thinking is assumption that the OP would hold the stock until it reaches $200. But he wouldn't. He was ready to sell at $110. He is better off selling covered call + shares @$110, then only selling shares @$110. Another problem is the assumption that everybody can sell on the top (in this case, $200), while it's obvious they can't. And since when is profit of $10 per share == a huge loss…

And the problem with yoru line of thinking is that at the moment you write a call you are stating the time at which you may be selling the stock. if you didn't write the call you could sell at any time, but you did write the call so you set the time at which you sell. if the stock goes up alot then you end up losing alot of the upside.

If you think the stock will go up from $100 to $200, don't sell covered call. Nobody forces you to. But if you have sold it, it means you didn't believe stock would go that much up.

If one sells a covered call but is not ready to sell the stock at that price, that's one's problem, not "covered call is a bad strategy" problem.

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

#222

Post by DontchaKnowit » Tue, Nov 15, 2022, 7:43 PM UTC

highwaylights wrote: post #50

DontchaKnowit wrote: post #30

Frankly, just reading the headline, I disagree. First of all, yes in a broad sense most people are gonna get fucked trading options if you don't know what they're doing. I know what I'm doing and my strategy is exclusively long equities. But you can absolutely make metric fuckloads of money trading options and there are some trades out there that ain't that hard to figure out. For example, you can print money on a re…

Double digit percentage returns every two months you say? Why with a starting balance of $10,000 that would be (at the very lowest end of that range) over $1.25 billion dollars after 20 years. If you don’t mind me asking, what was the offer that tempted you to give that up?

To be clear I was talking returns on the trade - not returns on my portfolio. The distinction here is that you could not throw your whole bankroll at this trade, because there is limited liquidity on both sides of the trade : e.g. when uvxy spikes, you are buying from the hand full of suckers that are willing to sell cheap puts. When it starts to trend back down, you are selling to the hand full of suckers that are willing to buy expensive puts. I was trading positions worth under 5k with this strategy when I was getting those returns. So yes, you are correct, this sounds too good to be true cause it is. you wouldn't be able to pull this strategy off with much more than what I was trading because the liquidity just wouldn't be there, so you could not compound these returns over time really, it would be a constant, fairly reliable source of high returns on a small amount of capital.

And the offer was for a job in the industry that would afford me the opportunity to learn a lot more about investing in general, especially about volatility based securities, while I was on the clock. It roughly doubled my salary too, so it was hard to pass up.

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

#223

Post by DontchaKnowit » Tue, Nov 15, 2022, 7:45 PM UTC

bena wrote: post #87

highwaylights wrote: post #50

Earlier quoted context omitted.

Double digit percentage returns every two months you say? Why with a starting balance of $10,000 that would be (at the very lowest end of that range) over $1.25 billion dollars after 20 years. If you don’t mind me asking, what was the offer that tempted you to give that up?

I feel a sort of gambler's mindset here as well. I'm sure you can get the occasional double digit percentage return every couple of months, but it is also couple with a lot of losses as well.

Definitely has the potentially for loss, but it was pretty damn consistent while I was doing it. As awful as it is, this trade is basically just taking advantage of retail options traders that fundamentally don't understand how UVXY works