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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

#91

Post by seiferteric »

Archelaos wrote: post #59

A warning about index funds, that were mentioned a couple of times in different threads here. If the investemnt bank issuing the index fund goes bankrupt, you lose your money - see Lehman Brothers. You can mitigate the risk by buying from different issuers. However, the bankruptcy risks might still be too closely related; in other words: there is the risk of a domino effect of bankruptcies of investment banks in a fu…

I have never heard this, is it really true? Most people have their 401k's/ira's in index/mutual funds so it would be pretty devastating if like vanguard or fidelity went under and everyone lost their money... to the point where I don't think the government would allow it to happen, but maybe that's just wishful thinking?

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

#92

Post by logicalmonster »

jnwatson wrote: post #66
logicalmonster wrote: post #48

Earlier quoted context omitted.

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…

That's like saying you can rent out a burning house. It is technically true, but folks usually like to preserve their initial capital while making income. There Ain't No Free Lunch in options. Covered calls give up potential upside gains for income now. You still have the same downside risk as the underlying stock.

> You still have the same downside risk as the underlying stock.

Taken as a whole, it's not the same exact downside risk because the premium you collect can make up for whatever downside that exists anytime you're holding a stock.

I'm not here to tell you what to do with your money, but all I'd say is that using a wheel strategy is inarguably less risky than buying stock outright.

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

#93

Post by neilv »

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…

Upvote for Bogleheads.

I'm a little sore from the market this year (but less this morning, when my ITOT total US stock market index ETF blipped up 4.8%). And I kinda regret that all my AGG (US bonds index ETF) followed advice to be placed in a tax-advantaged account (where it not only didn't take the edge off equities being down, but I can't even tax loss harvest it).

But Bogleheads is still looking like the best school of thought.

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

#94

Post by MuffinFlavored »

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…

> NBBO

National Best Bid and Offer (NBBO)

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

#95

Post by belter »

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.

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

#98

Post by MuffinFlavored »

NovemberWhiskey wrote: post #77
dsfyu404ed wrote: post #58

Earlier quoted context omitted.

This is terrible advice for a retail trader. Don't pick a fight with the pros. Find a dusty corner they don't care about and pick up the scraps. (this rule applies well to a lot of professions, not just high finance)

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.

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

#100

Post by kelseyfrog »

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…

Right, so in case it's not clear, people are asking you to quantify "basically" and "essentially" with math to get a number out. English words aren't going to make your point. They want you to back it up with a statistical analysis.
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