quote:

Originally posted by honestlou:

quote:

Originally posted by FenderBender:

quote:

Originally posted by honestlou:
Saying trading options is “gambling”, “playing roulette“, etc., are all very ignorant statements. Options are no more gambling than buying any stock- you are “betting” that the stock goes up, or down in the case of a short sale.

What options can be, is highly leveraged compared to stocks. What options also can be are great tools to hedge positions, or a more conservative way to buy a stock.

If you want to trade options, get educated and start small and slow. Decide what you want to do. There are many strategies other than just buying calls or puts.

non-sense.

if I buy a security and an option on a second security that's a week out and the option doesn't come into the money that option premium is gone, however I'd still own the security, regardless of it's current market value.

I didn’t say that you couldn’t do that. I said that you didn’t have to do that. Regardless, if you buy the stock you’re still “betting” that it will go up. If you buy the call option, you have a shorter period in which it can go up, but your return can be much greater- hence, leveraged.

But what if you sell the call? Or sell the put? Not all options are just gambling.

You can sell either and still lose your entire position.

quote:

Originally posted by FenderBender:

quote:

Originally posted by honestlou:

quote:

Originally posted by FenderBender:

quote:

Originally posted by honestlou:
Saying trading options is “gambling”, “playing roulette“, etc., are all very ignorant statements. Options are no more gambling than buying any stock- you are “betting” that the stock goes up, or down in the case of a short sale.

What options can be, is highly leveraged compared to stocks. What options also can be are great tools to hedge positions, or a more conservative way to buy a stock.

If you want to trade options, get educated and start small and slow. Decide what you want to do. There are many strategies other than just buying calls or puts.

non-sense.

if I buy a security and an option on a second security that's a week out and the option doesn't come into the money that option premium is gone, however I'd still own the security, regardless of it's current market value.

I didn’t say that you couldn’t do that. I said that you didn’t have to do that. Regardless, if you buy the stock you’re still “betting” that it will go up. If you buy the call option, you have a shorter period in which it can go up, but your return can be much greater- hence, leveraged.

But what if you sell the call? Or sell the put? Not all options are just gambling.

You can sell either and still lose your entire position.

You can buy either and lose the entire investment
You can buy one and sell the other and lose your entire investment

I don't understand the point you are laboring to make.

You seem to be reaching for the point that all risk is gambling. If that's the point you are after you can have it.

I see a distinct difference in a thoughtful strategy with known quantities and an acceptable risk level as something other than a dice roll, calling to an inside straight, or betting on the next pitch in baseball.

quote:

Originally posted by FenderBender:

quote:

Originally posted by honestlou:

quote:

Originally posted by FenderBender:

quote:

Originally posted by honestlou:
Saying trading options is “gambling”, “playing roulette“, etc., are all very ignorant statements. Options are no more gambling than buying any stock- you are “betting” that the stock goes up, or down in the case of a short sale.

What options can be, is highly leveraged compared to stocks. What options also can be are great tools to hedge positions, or a more conservative way to buy a stock.

If you want to trade options, get educated and start small and slow. Decide what you want to do. There are many strategies other than just buying calls or puts.

non-sense.

if I buy a security and an option on a second security that's a week out and the option doesn't come into the money that option premium is gone, however I'd still own the security, regardless of it's current market value.

I didn’t say that you couldn’t do that. I said that you didn’t have to do that. Regardless, if you buy the stock you’re still “betting” that it will go up. If you buy the call option, you have a shorter period in which it can go up, but your return can be much greater- hence, leveraged.

But what if you sell the call? Or sell the put? Not all options are just gambling.

You can sell either and still lose your entire position.

Please give me an example of how you can sell a put, even a naked put, and still lose your entire position.

quote:

Originally posted by FenderBender:

quote:

Originally posted by honestlou:
Saying trading options is “gambling”, “playing roulette“, etc., are all very ignorant statements. Options are no more gambling than buying any stock- you are “betting” that the stock goes up, or down in the case of a short sale.

What options can be, is highly leveraged compared to stocks. What options also can be are great tools to hedge positions, or a more conservative way to buy a stock.

If you want to trade options, get educated and start small and slow. Decide what you want to do. There are many strategies other than just buying calls or puts.

non-sense.

if I buy a security and an option on a second security that's a week out and the option doesn't come into the money that option premium is gone, however I'd still own the security, regardless of it's current market value.

FenderBender, if you're saying options is like gambling, that's not exactly correct. It's worse than gambling. With any gambling, you can figure out the odds. With options, there are no published odds.

On the other hand, saying that buying an option that becomes worthless and you lose the money that you used to buy it is like gambling doesn't really understand the context. When you pay premiums for a term life and you don't die while the insurance is in force, do you consider that gambling since you lose all the premiums you paid? If buying term life insurance isn't gambling, then buying an option isn't gambling either.

Folks are getting hung up on how much risk is "gambling" vs normal investment risk vs normal trading risk.

Short term traders should be capping their losses with some kind of plan before they even buy. So perhaps 5% or 10% stop loss. Something based on volatility and what the charts tell you.

Long term investors generally don't care what happens short term, so even a market crash of 40%, which is pretty extreme, is tolerable for long term holdings. You can be confident that the value returns in 1-3 years usually. If you're picking individual stocks, your risk is higher than buying funds, but you can still control your losses.

But buying naked options is a different animal. The vast majority of options expire worthless. Every single owner of those options lost 100% of their investment. The expiration date is what makes the odds be so against you. The amplification factor of the option over the underlying equity makes it that much more volatile. You can be correct at the moment you buy the option, but tomorrow some event chops 90% off the value. Or, nothing changes over the weeks or months you hold it, so the time value slowly evaporates. Your loss ends up 100% even though the underlying equity hasn't lost a penny.

Hedging is different, as are covered calls or covered puts. Done right you can harvest a small percentage at regular intervals, with the risk being missing out on a big gain on the underlying equity. It's a lot of work for small percentages.

The market makers always win big on the bid/ask spread.

I sell covered calls. Most months, I simply keep the option premium and sell the call again next month. The old adage is it's kinda like owning a brothel...............

I also sell puts on stocks I want to buy instead of buying the stock. I get paid for the put and if the put get exercised, I own a stick that I wanted at a cheaper price than if I had bought the stock outright.

I download about 5 years of historical data historical data and see how many times an option would have been exercised. I then choose a strike price that will get exercised about 5% of the time.

It's not as speculative gambling as some people indicate.

quote:

Originally posted by FenderBender:

quote:

Originally posted by honestlou:
Saying trading options is “gambling”, “playing roulette“, etc., are all very ignorant statements. Options are no more gambling than buying any stock- you are “betting” that the stock goes up, or down in the case of a short sale.

What options can be, is highly leveraged compared to stocks. What options also can be are great tools to hedge positions, or a more conservative way to buy a stock.

If you want to trade options, get educated and start small and slow. Decide what you want to do. There are many strategies other than just buying calls or puts.

non-sense.

if I buy a security and an option on a second security that's a week out and the option doesn't come into the money that option premium is gone, however I'd still own the security, regardless of it's current market value.

This tells me you know very little about options because only a fool would let an option expire to give up the entire premium. I’d simply sell the option and take a percentage of the premium loss similar to selling a stock that goes down and taking a loss. Or I roll the option down until such a time that the stock goes back up and then sell the option at a gain.

The only option I would ever exercise would be, as others have said here, if I sell a put because I want to own the stock at a lower price. And the only time I really want to own a stock is if it has a fair dividend. Because once I own the stock, I collect a dividend and can write to cover calls on the shares.

The investing advice subscription services earn their money selling subscriptions. If they could earn more money trading they would do that and not bother selling advice. It’s your money, ultimately you must decide what you want to do with it. If you are looking into getting rich quick schemes you are likely also in debt, my suggestion would be to retire debt, and not acquire any more before trying to grow your taxable pile. Good luck

quote:

Originally posted by Stlhead:
The investing advice subscription services earn their money selling subscriptions. If they could earn more money trading they would do that and not bother selling advice. It’s your money, ultimately you must decide what you want to do with it. If you are looking into getting rich quick schemes you are likely also in debt, my suggestion would be to retire debt, and not acquire any more before trying to grow your taxable pile. Good luck

Thanks for this worthless advice. I am certainly not in debt. My specific question was if anybody had any actual experience with those services.

quote:

Originally posted by L90814:

quote:

Originally posted by Stlhead:
The investing advice subscription services earn their money selling subscriptions. If they could earn more money trading they would do that and not bother selling advice. It’s your money, ultimately you must decide what you want to do with it. If you are looking into getting rich quick schemes you are likely also in debt, my suggestion would be to retire debt, and not acquire any more before trying to grow your taxable pile. Good luck

Thanks for this worthless advice. I am certainly not in debt. My specific question was if anybody had any actual experience with those services.

I have actual experience with a couple; Value Line is useful and affordable and focuses on reality rather than the exotic.

I am happy that you are debt free and wish you well. There are far too few people in our society who are able to achieve that level of freedom and I congratulate any who make it. Perhaps you should be sharing your knowledge with the rest of us as you have attained the goal of many?

quote:

Originally posted by heathtx:

I also sell puts on stocks I want to buy instead of buying the stock. I get paid for the put and if the put get exercised, I own a stick that I wanted at a cheaper price than if I had bought the stock outright.

That sounds like an interesting strategy and I want to see if I'm understanding correctly. By selling a put, you sell someone the right to sell you a stock at a specified price, presumably lower than the current price.

And should the price go at or below the strike price, the person actually sells you the stock that you wanted to own in the first place albeit higher than the prevailing price? Are you really "forced" to buy the shares? I suppose you have to have money on hand or available on margin to buy the stock, correct?

^^^^

You have to have cash or margin available for the possible forced buy of the stock before your Put sale is transacted. Neither the transacting exchange nor the broker is going to take any avoidable risk-it's all on the transactors.

quote:

Originally posted by Rey HRH:

quote:

Originally posted by heathtx:

I also sell puts on stocks I want to buy instead of buying the stock. I get paid for the put and if the put get exercised, I own a stick that I wanted at a cheaper price than if I had bought the stock outright.

That sounds like an interesting strategy and I want to see if I'm understanding correctly. By selling a put, you sell someone the right to sell you a stock at a specified price, presumably lower than the current price.

And should the price go at or below the strike price, the person actually sells you the stock that you wanted to own in the first place albeit higher than the prevailing price? Are you really "forced" to buy the shares? I suppose you have to have money on hand or available on margin to buy the stock, correct?

It’s called a cash secured put.

I did covered calls for a few years.

As my broker said, all your good stocks will be called away.

It is guaranteed money, if you are into the short term.

You make money on the call and if the stock gets called you get paid a profit.

It is not for the long term investor.

quote:

Originally posted by Rey HRH:

quote:

Originally posted by heathtx:

I also sell puts on stocks I want to buy instead of buying the stock. I get paid for the put and if the put get exercised, I own a stick that I wanted at a cheaper price than if I had bought the stock outright.

That sounds like an interesting strategy and I want to see if I'm understanding correctly. By selling a put, you sell someone the right to sell you a stock at a specified price, presumably lower than the current price.

And should the price go at or below the strike price, the person actually sells you the stock that you wanted to own in the first place albeit higher than the prevailing price? Are you really "forced" to buy the shares? I suppose you have to have money on hand or available on margin to buy the stock, correct?

If you sell a Put and the price goes below the strike price I am obligated to buy the stock at the strike porice. If a stock falls significantly below the strike price that could hurt big time. However, the stocks I do this with are solid high dividend paying stocks and I don't sell puts real close to current trading price. I don't make a lot of $ on the puts, only about 8-10% per year. It beats CDs and Tbills........