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This new thread is for new baby like me for option world. I am like old traditional invester who buy naked stock and later hold it or trade in simple way.

I was thinking for equity options for more than a year or so but didn't get into this. My lots of friends are only into equity options investment. After my first posting in this forum "Why ETF?" and commnets from you guys it helps me to rethink investment stratigies. I realized that my investment stratigies missing Option components.

Thanks to humble sharing Equity options guide and few options example. I am also gathering the option inofrmation from various sources. It make sense for me to get into equity options for trading and use my current portfolio for long term investment.

I hope this conversation will help person like me, FinanceGuru and other intersted person into options. Let's please share your thoughts and experince about options.
 

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harry

i'm sure you know that many studies show that it's the seller of options who makes money, while it is the poor buyer aka the short-term speculator who, alas, will usually lose. So one wants to be in the role of the party who, as time passes, is continually selling.

there was a perfect example this afternoon in goog. It was a great opportunity to sell an out-of-the-money call. Stocks and their options tend to trade up in the days prior to earnings announcements, and quite often both will droop following earnings even when the report is spectacularly good, which in fact goog's was not. Many pro option traders put on special pre-earnings-announcement strategies that they don't practice at other tmes. So selling out-of-the-money calls in goog today, in order to capture the high premium, was kind of a no-brainer.

as it happens goog has fallen badly after hours and those same calls will fetch far less when they resume trading tomorrow morning.

as a general comment, i'd like to mention that the effect of option trading combined with an underlying stock portfolio is that one trades the actual stocks relatively rarely. One is continually adjusting the options, but one tends to stay long in the stock for literally years. You see, if one has an elaborate option structure built on top of a stock, one cannot precipitously sell the stock and leave those options naked. Either the broker won't allow it, or the margin position won't allow it, or common sense & good prudence won't allow it. If you are used to zipping into & out of stocks frequently, you might find such long holding periods to be restrictive & oppressive. It's something worth thinking about !
 
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