I guess I'm the resident commodity trader, as well as a trader of volatile stocks. I don't have much hands-on experience with options but I'm confident that I could make the jump since I have a foundation in determining direction before it happens.

For me, the main problem with options is the sheer amount of data you'll have to sift through. Each item I work with now will have 30X, 40X, 50X, etc, of MORE data I would have to deal with since there are a myriad of strike prices available to work with.

A modern computer and a program to sift through it all is mandatory, IMHO. That is, if you're really serious about doing it.

If you're interested, do a search of the lounge using my user name and the keywords "day trading". The opinions mentioned there apply to options trading as well.

Lastly, what you are contemplating is possible but people have a tendency to get drawn in without a clear understanding of the effort needed to succeed. That's been my experience with the financial markets in general.

And so it goes,

V.

quote:

snip...



Lastly, what you are contemplating is possible but people have a tendency to get drawn in without a clear understanding of the effort needed to succeed. That's been my experience with the financial markets in general.

And so it goes,

V.

Truth

I had to study options as part of my MBA. I studied it additionally on my own because I was interested. I even went through the qualification process with my brokerage. There are pricing theories on options.

As pointed out already, it's a zero sum game. That may not dissuade you. It works by leverage in the same way as buying multiple houses by putting minimum down payments and hoping the value of the value of the house increases. The resulting retun on your down payment is multiplied by the leverage. Are you comfortable with that idea?

What complicates it further is there is a time component on the options. They expire on the third Friday of the contract month. Let's say a stock sells for $100. You think it will go up by a minimum of $110 before contract end so you buy call options with a strike price of $110 for month of June (It doesn't matter which month). The price of the stock has to go up at least $110 plus trading commission costs for you to break even. If it doesn't, your options become worthless and you're out of money.

There's the strategy that people tout called straddling the box. You buy call options to buy at a certain level above the current price and you buy put options to sell at a certain level below the current price. The idea is you make money either way if the price moves that much above the current price or below the current price. The problem is if the price stays within the box, you lose on both ends.

These are just naked bets and you'd be swimming with the big guns similar to dabbling in foreign exchange markets betting which way rates would go where you'd be swimming with the big central banks.

The main legitimate us of options is as hedge bets to balance your portfolio. For example, if you have a stock position and you're "afraid" the stock price may go down but you don't want to liquidate and sell your position for some reason such as taxes, you would buy put options to sell at a lower price than the current price thereby limiting your risk exposure.

You can certainly make lots of money on it and you can certainly lose lots of money as well. At least, you're limited to the amount you stake.

Having said all that, I never made any actual options trade because I learned I do a poor job calling out the direction the market or any particular stock anyway. I did make money buying and selling some stocks I was tracking but I think I might have even been better just buying and holding.

I've been a professional commodities, futures and options trader for 20 years. Was a floor trader at the Chicago Mercantile Exchange for much of that until it closed down. Trading off the floor since then.

Happy to help if I can.

quote:

Originally posted by ChicagoSigMan:
I've been a professional commodities, futures and options trader for 20 years. Was a floor trader at the Chicago Mercantile Exchange for much of that until it closed down. Trading off the floor since then.

Happy to help if I can.

Opportunity knocks.

Trading options, or just about anything else, CAN be done if you put the effort forward and are patient with yourself.

V.

quote:

Originally posted by 220-9er:
Leveraged gambling.
Good for people with insider information.
All others, beware.
If you're asking here, buy lottery tickets.

If you, or anyone else, trades public companies with insider information, it is a crime that the SEC and FBI take seriously. Some people may have information that isn't as widely known, but isn't true insider information. It is usually obvious when people are trading on true insider information (because most of them are insiders, and the public companies police it themselves by prohibiting their execs from trading at all), and they get in trouble.

quote:

Originally posted by Rey HRH:
You can certainly make lots of money on it and you can certainly lose lots of money as well. At least, you're limited to the amount you stake

Well, if you buy contracts, that's true.

Not true for writing them though.

A good friend of mine made north of $700,000 on a single Options buy.

Unfortunately, he ultimately ended up spending a year and a day in federal prison for insider trading, but eh...whatta ya' gonna do? Right?

I’m not asking someone to convince me to do it. I’m asking people that have for their experience doing it.[/QUOTE]

My experience;

I decided to risk $5,000 buying call options back in 1987. I lost it all in about three months. So I stopped trading options.

Many years ago got a phone call from a fast talker who wanted me to invest in options, I hung up fast.

quote:

Originally posted by Balzé Halzé:
A good friend of mine made north of $700,000 on a single Options buy.

Unfortunately, he ultimately ended up spending a year and a day in federal prison for insider trading, but eh...whatta ya' gonna do? Right?

Did he get to keep the money? Might not have been a bad deal. LOL

quote:

Originally posted by bigwagon:

Did he get to keep the money? Might not have been a bad deal. LOL

Not quite. Not only did he have to essentially pay it back, but he also was hit with hundreds of thousands in fines. On top of that, the IRS still took their share of the Capital gains. Nice, huh?

On the plus side, he can pretty much write off the loss on his taxes for practically the rest of his life. Although the fact that he's now a felon really blows.

quote:

Originally posted by joel9507:

quote:

Originally posted by Rey HRH:
You can certainly make lots of money on it and you can certainly lose lots of money as well. At least, you're limited to the amount you stake

Well, if you buy contracts, that's true.

Not true for writing them though.

Amen. And if one doesn’t understand the distinction - even from your brief adage - that person should steer clear of the pool!

quote:

Originally posted by heathtx:
I have a stock dividend portfolio that pays about 7.5% dividend. I would like to increase the number of shares I have in a few of the positions. I sell puts on positions I want more shares of at a strike price of 15-20% down from where they currently trade.

If I get the shares I am ok with the extra dividend, if the options expire, I keep the option premium and I am happy.

OP,

Heath’s above strategy is a good example of where one first needs to understand risks associated with buying vs selling (ie writing) options and also needs to decide if one’s strategy will be based on a technical or fundamental view.

By selling puts, Heath is theoretically exposed to a loss equal to the option’s strike price (for which he might be forced to pay) less his premium initially collected. The risk is not as open-ended as that when selling a “naked” call, but it can still be substantial.

His strategy is akin to selling insurance. Absent brief luck, he must be competent in picking & tracking a stock and emphasize fundamental valuation. At the end of the day, he needs to be reasonably convinced that the “put” cat will bounce and remain vibrant.

He is also prioritizing cash flow (both the premium and later dividends) but that still requires a confidence that the firm will continue to generate sufficient earnings growth that offsets the inherent loss of value resulting from distribution of dividends and / or a brief price decline that trigger’s the put.

An option can be an effective, useful tool and it can also blow a hole in your ass. Any gun enthusiast will understand that analogy.

I did some years ago. I knew the future was rosy and I did make some money at it. I also learned that in addition to getting the direction right you also have to get the timing right. I’m sure there are many things more frustrating than watching a stock go through the roof a couple days after your options expired worthless, but at the time I couldn’t think of them.

At least with a stock, you own a piece of a company. Sure, it can totally implode and lose all value, but the odds of that are much lower than the odds of an option (put or call) expiring worthless.

quote:

Originally posted by joel9507:

quote:

Originally posted by Rey HRH:
You can certainly make lots of money on it and you can certainly lose lots of money as well. At least, you're limited to the amount you stake

Well, if you buy contracts, that's true.

Not true for writing them though.

Yes, selling calls naked requires some stones. Selling covered calls on the other hand is running the risk of giving up possible gains for known income. I know a few folks who have sold covered calls to increase their portfolio yield. Not something I ever felt the urge to do, but...

quote:

Originally posted by joel9507:

quote:

Originally posted by Rey HRH:
You can certainly make lots of money on it and you can certainly lose lots of money as well. At least, you're limited to the amount you stake

Well, if you buy contracts, that's true.

Not true for writing them though.

If you're stupid enough to be asking questions on an internet forum about options AND writing options contracts, that's a level of stupid that can't be fixed. Note that what i term being stupid is doing both activities and not just asking questions.

JAllen would have had a field day with this thread.

For god's sake man, this is the result of people wanting to get into the market, not knowing enough, and using a shitty platform.

https://www.forbes.com/sites/s...alance/#4feb79625928

IT does not help seeing this joker is egging people on to get people get invested.

https://www.foxbusiness.com/ma...blers-trading-stocks

Thanks for those that have given reasonable info, I appreciate it. I signed up for my account and sometime in the future I’ll let you know if I lost all $500 or if I’m retiring early. FYI I had originally asked because several of my coworkers have done it. Luck or not two have made tens of thousands, the rest have made less but still have profited. Will they lose it all? Maybe but to me it’s worth $500 to find out myself.

quote:

Originally posted by mrvmax:
Thanks for those that have given reasonable info, I appreciate it. I signed up for my account and sometime in the future I’ll let you know if I lost all $500 or if I’m retiring early. FYI I had originally asked because several of my coworkers have done it. Luck or not two have made tens of thousands, the rest have made less but still have profited. Will they lose it all? Maybe but to me it’s worth $500 to find out myself.

Just curious, what sized portfolios did they have, how much did they start with in options trading, and what was their background?