>Potential Losses: 100% of you investment
>Potential Gains: Infinite
>Potential Losses: 100% of your investment
>Potential Gains: The strike price
>Potential Losses: Infinite
>Potential Gains: 100% of your writing price
>Potential Losses: Strike price minus writing price
>Potential Gains: Writing price
With these four possibilities in mind, why would anybody actually write options?
Picture completely unrelated, sorry about that.
it's all about expected value. when you write or sell options most of the time you win small but sometimes you lose big. option selling strategies have been very successful in general for the past 5/6 years.
A call option is a contract that gives you the option to buy stock at the strike price stated in the contract.
A put option is the option to sell your stock at a given strike price.
They're basically insurance against price moves in stock that allow you to enter or exit a position at the time of maturity with the given strike price. Their value is derived relative to how much time is to maturity is left and the price of the stock. You don't have to own stock to buy the contracts.
Whoo boy lets do this.
You're forgetting two other positions long and short stock, there are 6 basic pieces.
Of the naked options the only one worth doing frequently is the short put.
Positioning and structuring matters a great deal.
1 standard deviation Long C/P
Probability of Profit 16+/-2%
1 standard deviation Short C/P
Probability of Profit 78% and 86%
As such naked longs are pure spec and hedge plays.
Naked shorts however are basic high leverage tools.
Naked puts 85% of the time or more you just keep the cash. the other 15% you keep the stock at a 1 standard deviation price - premium collected.
Do you like discounts I like discounts.
Warren Buffet's Preferred Position entrance Strategy.
Short calls are the opposite, bearish, you collect less and there's less probability there. but when shit bursts up, sell a few of these, because no stock has gone to infinity and beyond yet.
Nakeds except the short put are generally not the preferred method of using options.
Covered call- has the same risk as a short put, but often costs more. Acts as a LARGE dividend. and consistently reduces cost basis. 100 Shares and a Short Call.
68% probability, of keeping the cash selling just out of the money calls. 45 days is the sweet spot, so 8 potential dividends a year, at .68% = 5 dividends per year. when managed correctly you keep most of the growth.
Do you like Growth stocks with a large frequent Dividend? I do.
the opposite strategy is the Synthetic Short Call
Short 100 Shares and a Short Put.
Stock market generally Creeps up but falls down hard. with short puts you keep 85% of the gains up, with short shares you keep 100% of the drop. #FlawlessMathematicalVictory
Do you want to go short and Get phat dividends during bulls and phatter gains during bears, I do$$$$
If you're trying to enter a position at the best price sell puts against your stock. Load it up.
Want me to go more advanced?
Tastytrade is Fantastic. its live right now. With 2 hot chicks catered to newb to intermediate audience.
I've put the bible of options trading in the DC as well. Options as Strategic investments
Glad you showed up Nassim
I've got your book Dynamic Hedging in here as well.
Well, intelligent market right? so without insider info you just have the books to look at which have been picked over by big money investors already, so a price going up is a total gamble
How the markets going to respond to xyz in a negative fashion is more up for debate so concievably betting on a stock dropping in price would be more accurate more times in the long haul, case in point martin schmegma and that biotech company he took over like a month ago? price went from 0.40 to 40.00 in like 3 days, now it did that because he owned 70% of the available stock and everyone else shorted the shit out of it, but most of the shoirt positions were in place prior to his anouncing he had taken over
this info was "available" but not to the general public, the general public read that he was going to be running a company and hating him : proceeded to jump in on the short.
profit to martin and anyone who had held through the initial squeeze.
So IMO the factors leading to a stocks price dropping are more fluid, whereas other than emotionalism and actual profits prices dont generally rise.
Also (and I could be talking out of my ass on this one) , when prices fall they can fall a shit ton, rarely does a stock with any length of existence go up more than a single digit at a time
Now for smaller accounts we have Spreads.
You reduce probability of profit slightly but in smaller accounts the risk mediation is far improved.
Say you've got a $10 stock. you're selling the 9 put for .50 Your break even is $8.50. Since options are written in 100xShares increments
Thats $50, risking $850, 1:17 reward:risk not great. So combo up.
Buy 8 put at .30 Sell 9 put @ .50
$20 risking $80 1:4 risk Breakeven @ 8.80
Calls spreads are the same thing in reverse.
The Risk is the distance between the Strikes - Credit Received.
The above was a Credit Spread.
You can have a debit Spread, but most of the time they're useless.
Those are the 3 basic structures Naked Options, Covered Options, and Spreads.
Lets Discuss teh Jade Lizard, invented by pic related.
Short Callspread and short put.
The trick is the put is sold for more than the width of the call spread.
So $100 stock
Sell at the money put for 3.50 and sell 1 std dev 3 dollar wide call spread for credit say .50
-99 put @ 3.50 | -104 call @ 1.80 | +107call @ 1.30
Max profit stock is between 99 and 104.
Total Credit Recieved is $4, so break even down is 95$, because the put credit $350is greater than the width of the call spread $300. even if the stock goes buzz lightyear moon man on us we make $50.
This is a neutral to bullish strategy
The concept of Neutrality of movement is how most options traders make money. 2015 was basically unchanged. Say it was $2000 when it started. The at the money SPX LEAP options (annual expirations) Jan 1 2016 to Dec31 2016
the at the money strangle is trading for $360 So the breakevens were 1640 and 2360
If 2016 were to be similar to 2015 with a high around 2100 and a low around 1800. You would have made 36000 on your roughly 150000 necessary to make the trade.
reduce your capital outlay on that Trade, You can turn it into an Iron Butterfly. 150k is a lot.
the 2400 calls are 5$ and the 1600 puts are 65$. Thats $29k gain and 43k risked
Bro, just started in May, I'm not mentor material. I'm also painting an idealized scenario, with fees and taxes and shifting volatility gains are reduced, but after about in an account they're nominal.
I've put 8k into the account, and fees are wrecking my shit. Just under 5k in account currently. commissions and fees ytd 4500,
379 trades, Biggest Drawdown 700 biggest win 2400.
We'll see in may after having been doing this for a year if it was worth it.
Did a directional play in chipotle and got fuxxed, oil stocks also not doing great.
I went in expecting to lose it all, so far winning.
Duration beats direction when rolling. Take your profits when they appear.
When volatility is low do calendars when volatility is high sell premium.
So far don't bet against amazon,
and believe the buy the rumor sell the news adage.
once you learn it bro, its like 6 clicks max per trade instead of your current 2.
The software does all the math for you.
if you want to learn with pictures
Dough.com is your best bet.
The reason you are getting burned by active trading spreads is because you don't have enough money in your account and you are trading too thin.
$5 wide is the thinnest you should go. Otherwise you can never roll your spreads when you get fucked.
Here is how rolling saves bad trades, you can't do this with narrow spreads. https://www.tastytrade.com/tt/shows/anatomy-of-a-trade/episodes/linkedin-lnkd-07-17-2015
>This could have been written better. I get the gist, but it took quite some effort.
The person writing it has only six months trading experience. It's like a first grader teaching things to a kindergarten class.
I meant gramatically more than anything.
>Stock market generally Creeps up but falls down hard. with short puts you keep 85% of the gains up, with short shares you keep 100% of the drop. #FlawlessMathematicalVictory
Not exactly a buy and a sell. When I was learning options I wanted to keep it that simple, but you have to also keep in mind that you can
Buy and sell puts to open
Buy and sell calls to open
Selling a put or call to open is just shorting, and you can use he analogy that you are basically a casino manager who watches your client's money slowly decay away into your pockets.
>Do you like discounts I like discounts
Nice explanation otherwise, for those of you who want to learn more, watch videos about options trading (esp. statistically). Also look at options percentage charts too as they helped me understand much quicker concepts such as covered calls/puts and butterfly spreads, etc.
Best thing about options is that you have a variety of spreads to choose from, and in different market conditions different spreads are more effective. So profitability in my opinion is much higher if you educate yourself correctly.
because "suck dick" ain't financial advice pigfucker.
Li_Sheng, you seem to have basic grasp of options so far. However, you've gotta understand the greek profiles of your options, otherwise at some point you're gonna get fucked and lose a lot of money when one of your stocks gaps and you couldn't predict it - options create leverage, you have to be careful.
I work on a flow based trading desk in options - the way professional traders at banks / hedge funds will actually use options is to have a volatility view, not so much as a view on the outright direction of the underlying. While this can be different when taking positions on individual stocks as opposed to e.g. FX, it's something to bear in mind.
Also, you said sell premium whenever vol looks high.. trust me markets are very sophisticated and there will be a good reason for this, it could easily be priced in. I've often seen vol prices look very high/expensive across events and the underlying stock/asset still move even more than market, this can happen regularly across large events (e.g. NFPs, rate decisions in the states).
Anyway, if any of you guys like the idea of personal account trading, options could not be a worse place to start unless you really know what you're doing, the same applies to other derivatives (CFDs etc). Start with something simple like buying the actual underlying stocks.
Iron Condors are not my favorite trade.
You can describe it two ways, a selling a Call Spread and selling a Put spread, or a Strangle with a slightly wider straddle.
The risk Reward ratio for this trade is usually 1:4 with around 62-68% probability at 1 std dev.
The wider the space between the short call and short put the greater the probability.
Defined Tail Risk
Usually pretty slow to collect
Lower Probability than Strangles
4 Legs = Maximum expense per trade
Most of the time a wider strangle is better, they are easier to manage if the trade goes against you, With the Iron Condor you committed to risk mitigation up front, and are pretty much locked in.
Sure you get fucked a little harder sometimes, but recall that hotness and craziness coincide.
For defined risk, Iron butterflies suit me much more.
Delta (directional risk) and Theta (premium Decay) I seem to have a good intuitive grasp of. Vega (Volatility risk) I have at least an operational understanding of. Gamma still eludes me as the derivative of delta I can verbalize its meaning as the acceleration of direction. but in practice I can't seem to make decisions on it beyond doing some trades wider and some trades narrower.
Volatility is the leading driver of profit in options selling, Generally, in introductions to people like OP who speak in terms of risk reward you talk in risk reward terms should you try to convert them.
Sometimes the options are mispriced, Past performance is no guarantee and options are priced on past performance. and you have to be on top of events. That's just the truth. But often even though they blast through, often they return, I forget the rate but it was high, like 75% of the time they'll come back within 90 days.
on personal trading I disagree. equities is one of the last things you do. Trading is serious and it should be treated that way. Options are fairly uniform and do not require much rote memorization, unlike futures. However they very quickly force you to learn the mathematical side of securities trading. Because People and not math are the weakest point in trading it behooves new folks to achieve a firm mathematical foundation upon which to apply their unique personal risk profiles. There is no argument that naked underlyings are simpler. however, in my experience the simple things are uniquely powerful and most often underestimated.
By going full robinhood, you open the door to mysticism, "indicators," and other situational at best voodoo.
Also the Brokers often have checks and balances in place to protect new traders from themselves.
It is a little bit harder to start with options but not much
I actually think options are as realistic as financial markets get and are therefore an ideal starting point.
I agree that too many people ignore greeks but the same exposures exist in equities. Timing risk is commonly cited as a risk stocks don't have but this is feelgood nonsense. "Paper" losses mean net worth hits and a hit to net worth restricts ability to pursue future opportunities. Put another way, volatility drives ability to sell in a timely manner at price paid, which is the definition of liquidity, which people accept as a driver of asset value.
We are all trading vol, all the time. Options make this explicit.
Delta is directional exposure. Gamma tells you how quickly your directional exposure may change as market conditions change. So a gamma neutral strategy would mean that your delta exposure will remain constant regardless of market conditions, and a strategy that is delta AND gamma neutral would mean your delta=0 even if world war 3 starts tomorrow.
So maybe today your delta looks low and you feel pretty safe, but the underlying gaps overnight and suddenly your delta exposure is massive at market open. Gamma would have warned you that was possible.
>Not knowing exactly how your investment is going to turn out before you bet it
>not knowing about risk management
>Not knowing about hedging
In plain language, your portfolio is a collection of risks. puts and calls make it easy to counteract risks (if it goes up, i win, if it goes down, i win)
this is what the wall street magicians are paid to do
oh god no, these were simply a few mvps and best of the best. I've got TBs of programs, and have sunk about $4k into seminars and Investment clubs.
I just heard this guy and its turning out very well. Basically the anti-Tai Lopez
thepiratebay (dot) se/torrent/11795112
Thanks for the plain english. I'm going to need a much bigger account if I'm going to make a delta-gamma neutral portfolio that makes money.
You can do the math man. guy's right.
I'm not surprised you too believe in "wall street magicians" and their mystical options strategies. You've admitted to having less than 6 months trading experience, virtually no capital, and no track record of success.
You apparently read a lot, cut-and-paste a lot, and shill for websites a lot. What I don't see is you making any fucking money.
There is literally no reason for you to give advice to anyone. Anyone who, for even a moment, considered you a source of useful information is a bigger idiot than you. Not that any of this is surprising on 4chan: classic case of the blind leading the blind.
>not being a scalper
THANKS FOR THE FREE MONEY
believe in. No I just like the math, and the concept, I'm still testing out its practicality in the real world. I'm no where near confident enough in options trading to call it a belief. I'm just gathering the data, and will evaluate in one full year of trading. Arbitrary but I think it will be sufficient.
Maybe you can post your successes in another thread to guide us mere mortals.
Don't worry, I contribute my advice quite often. But this isn't a general advice thread; its a thread about options strategies.
I'm glad to hear you don't even try to refute my criticisms. You're a terrible source of advice, but at least you don't actively roleplay. However, you really should include a disclaimer every time you post. Its misleading to give advice when all you do is copy bits and pieces from options shills. You deliberately give the misrepresentation that you yourself are knowledgeable, experienced, and/or successful when in fact you are none of these.
Rest assured, I will remind the good folks of /biz/ of you lack of bone fides every chance possible unless you suddenly discover a conscious and start doing it yourself. You're a fraud and your advice is harmful, no matter how much you pretend otherwise.
It's sad that all you can do is accuse me of trolling, rather than refute any of the criticisms I've levelled.
There's a word for that: denial.
Well thank you for your vigilance and good discussions. There is nothing better in life than being called on your BS. I frequently post my experience level as you ought to know. Though I have been a bit lazy with it during the school semester and with the increased trolling.
To memory the only strategy I push without a hint of reservation is the covered call. It is both a short and long term strategy, for any account size. You can get dividend like behavior on growth stocks, or index ETFs, and its one of the cheapest.
So the return on capital number they use is precise but misleading to the novice. As part of the risk reduction element of trading options you leave about 40% of your capital liquid. So to change ROC to ROI you have to multiply by the proportion of capital in use.
Whelp now I do. Just had to hear it said the right way at the right time.
>Knowledgeable, Experienced, Successful
Depends on what we're talking about.
I'd be well versed in Real Estate, having managed one venture and started another and done the research on thousands of properties over the years, with some hard plans for my future capital.
I've also started two companies and can guide people through that.
My finances are in order and I frequently talk about personal finance and the math behind it, the only disagreements I have here are with 100% no debt ever people who argue math with emotion.
On college advice my posts are usually how to get in state tuition by registering a local business.
On investments, I advocate people to completely fuck off mutual funds, to get into no load indexes or index futures, and to explore options, and that precious metals is a sellers game.
I haven't made it yet, sure. I'm not iHaz but that guys got a few work decades on me though. What I do have though is several work years on the rote amateurs who post here thinking this is a game.
>I haven't made it yet, sure.
What you fail to appreciate is that the worthlessness of your advice has nothing to do with whether you've "made it" or not. Your advice is bad because it's wrong, not because you are inexperienced and unsuccessful. While your lack of experience and success may cause you to give bad advice, let's be specific about why you're a terrible contributor to this board.
Someone without a penny could (in theory) give consistently insightful, intelligent and useful advice, while someone with a huge fortune could (in theory) give terrible, harmful, and incomplete recommendations. Here on 4chan we judge posts by their quality, not the merits of the person posting them.
In your case what we're really facing is the worst possible situation: someone with a small amount of knowledge, but no wisdom. The only thing worse than advice that's 100% wrong is advice that's 25% right. And that's exactly what you do: give advice that's partially accurate, but mostly wrong, incomplete, and inappropriate. It has the thinnest patina of truth, but is actually more harmful than complete bullshit.
Most idiots can tell when they're getting 100% wrong advice, but too many people will happily follow 25% correct advice to their doom.
Now were you to limit your advice to the topics that you claim to have experience, perhaps the quality of your posts would rise. I doubt it, but I'd be willing to cut you some slack if I saw more useful information and less bullshit. But you seem intent on throwing your two cents into every thread, including those involving advanced investing topics where you're plainly out of your depth.
In real life, someone might take you aside and politely inform you that you look like a moron to every intelligent person here, and that you need to limit yourself. But this isn't real life and you have no friends here. So all we can do is point out that you're a clueless fucktard and hope you somehow grow a shred of self-respect.
I was going to make this same point but got interrupted. with the opposite view of course, that I limit my advice to that which I know and am experienced in or am doing currently.
Most of my posts are at text limit often spanning often multiple posts with followup for concerns and misunderstandings, and often posting source and complete reference material for others to followup and make up their own minds.
I have yet to see a post countering my math with better more complete math or frankly any math at all.
You seem intent on only discussing options in the thread, and refute them as a long term wealth building strategy. You also put up a strawman thread about advanced investing topics where I'm out of my depth. This is the only "advanced" thread we've had in months.
You've given zero evidence to counter the claim, besides my inexperience which I readily admit to. However you present no alternatives either. Such an ungenerous criticism could hardly be called legitimate and you do yourself no favors.
The potential that I could have fallen prey to the options shills and in time will have lost all the money I put into their sophisticated game is a legit concern.
However, I will continue to advocate options for a few reasons.
The math and probabilities work out for at least some people.
My performance has been improving in both consistency and profitability.
The TastyTrade folks are FREE and years of work is archived for FREE
Their work is Data Driven and Data Focused.
I have yet to see better financial Data.
My experiment is not over and I think continuity of shared experience is important.
I'd like /biz/ to see me win or see me fail to give a real accounting to the matter.
Options are used by "professional money managers" so a self directed-investor should also use them or at least understand how to use them.
They are cheaper positions to enter than equities and can be leveraged in your favor.
risk management is critical 2day
>The math and probabilities work out for at least some people.
Every time you post, you validate my low opinion of your intellect. Not understanding the utter stupidity of the above-quoted comment is exactly why you should never give financial advice to anyone.
I'm not here to debate your motives. They're irrelevant and self-centered anyway. You having a "good heart" doesn't excuse the fact that you give shitty advice. Indeed, it makes it quite worse.
>I have yet to see a post countering my math
Any retard can add 2 + 2 and find the right result. No one is questioning your math skills. What people don't like about your posts is you complete ignorance of theory, strategy and perspective. All you do -- all you can do -- is copy and paste what someone else said. By all optics, you're nothing more than a paid shill for an options trading website.
>The potential that I could have fallen prey to the options shills and in time will have lost all the money I put into their sophisticated game is a legit concern.
What you (again) fail to grasp is that you've already fallen for these shills, regardless of what your short-term metrics are or aren't. You're already a lost cause, and I don't honestly think any of your detractors give a fuck about your finances.
But what sucks is what you're potentially doing to other people, who might well be mislead by your incomplete, inaccurate, and thoughtless posts.
tl;dr This is 4chan. No one cares about you. But you're stinking up the board. Stop doing that.
>Stinking up the board
and you're not
your opinions are options are stupid and Li is stupid
You've clearly expounded at length on the latter point, care to talk about the former.
And despite your rhetoric against me personally, you clearly have little to add to the discussion.
I thought it might be but Mr Haz always comes with facts and studies. This guy's just doubling down on the ad hom I put in front of him with cheap rhetoric.
What I really want to know is what's actually worth the time to read up and learn and what isn't. It's very easy to find tons and tons of torrented material to read but I don't even know where to start. I'm in my early twenties and just now starting to set aside money that I'd like to trade with eventually once I learn my shit.
Depends what you are interested in. I found anything but derivatives to be a waste of time, and found interest rate swaps really interesting so settled on learning those. Other people think derivatives are the devil and equities are intuitive. Others think indexing is the one true path, and others think the bond market is too large to ignore. I know a hedgie who gets visibly anxious if a conversation goes on for more than a couple of minutes without being related to the almond market. People are weird about their preferences so no one can really decide for you.
But whatever you choose, specialize. Jacks of all trades are kind of crap these days.