Best Thread The Options edge (Writing Vs Buying)

[ducati998]

Four....Five including CYOF's And all of them are showing profits already, I am satisfied to report.

I am able to gass away because I have a complete mindmap of what is happening inside my head, like a video whose speed I can alter to go very fast or very slow or whatever and therefore the question of multitasking is not a problem for me in terms of ongoing visual mathematics, of logging numbers and clocking the relationship that exists between them as they unfold.

But if someone comes into the room and speaks ( to ask a question particularly) , then the spell is broken ~ that's it ~ I now need to get into mode again to be able to lock into that way of thinking which is very special to me. It is as if the numbers talk a language, in phrases, that have meaning, announce imminent developments, give warnings or confirm situations.

It has taken me a long time to train my wife not to interrupt when the warning light is on outside. It is lit when there is something going on, which is more frequent than infrequent, except for weekends and public holidays.

Soccy baby

Obviously your complete lack of understanding of your position really knows no bounds.
Let's see if we can keep it really simple, you know 1+1 = 2

You SOLD [wrote] Options contracts.
You have already been paid 100% of your reward.
There is no more profit coming from this trade.
All that can now happen is;

*you get to keep your maximum reward
*you get to keep a % of your reward to your breakeven point
*you start losing money

If you close this trade, at a profit, and initiate a new trade, well that's something else entirely.
Your profit cannot exceed that which you have already banked however on this trade.

After all your bluster and BS, 5 contracts?
It made me smile.
Why are you back on this thread?

jog on peanut
d998

 

[Splitlink]

There have been over 17,000 visits to this thread so I would like to refer people to a quote from John Piper's "The Way to Trade". Not all of the book is about option trading and, apart from his forays into psychology, which I skipped, his book is a useful read for all futures traders.

"Writing naked options is not something which should be undertaken other than in a professional manner and on a full-time basis"

We are not, all, as brilliant as Socrates-- as he has reminded us, on more than one occasion.

However, Piper also says

"As a general rule I believe that it is difficult to make money BUYING options!"

I know that the second quote is very true because that is what I did for a long time. I switched to futures.

Split

 

[Profitaker]

Splitlink

When he say's that writing shoul be done "in a professional manner" you could probably re-write that as knowing what one's doing. I would agree.

Yes, it is difficult making money buying options, but so is it difficult shorting them. But, and it is abig BUT, if you get it badly wrong (as we all do occasionally), would you rather it be via long or short options ?

 

[Splitlink]

Splitlink

When he say's that writing shoul be done "in a professional manner" you could probably re-write that as knowing what one's doing. I would agree.

Yes, it is difficult making money buying options, but so is it difficult shorting them. But, and it is abig BUT, if you get it badly wrong (as we all do occasionally), would you rather it be via long or short options ?

You are nailing me down, aren't you? I don't want to sit down and work out an example for hedging, my posts should be based on the fact that I have been a buyer of options in the past, have failed, given up and moved on to something else.

As a buyer, I gradually moved my trades out, calendarwise, to a point where there was no time decay. The problem? Too expensive and why go to the trouble when one can buy the future? Buying closer than 8 weeks away got me involved with time wastage and it was very difficult to make money.

I, now, think that by choosing a near dated option, priced at around 80-90 pence or more, to make it worthwhile, and writing it could be a more profitable strategy because of the decay, but it would have to be hedged. To prove that, I would need a few months but I am comfortable with what I do, now, and don't intend to go down that road!

To be like Socrates, sitting in front a of a computer all day when I could be out for a walk does not appeal any more. I know, from past posts, that he must be , at least, my age and I am going for 75! But that is what it amounts to--in his last post to me, here, he said so.

Another answer for you is that writing has risks but it is what the professionals do. They are more interested in income on millions of pouinds, They know when there is a bubble, spike or what have you that they can take advantage of and we don't. We, on the other hand, having less capital, are after fortunes so the attraction of unlimited profits and limited losses appeals. Unfortunately, most bought calls lose money, That lost money is picked up by the writers.

Take Socrates case. He sold out this morning. The index went against him overnight and closed and bottomed at 6123. He closed very early with a profit. He must have been more relieved than he let on! I bet he missed his Weetabix! Naked option writers take note!

Split

 

[SOCRATES]

To be like Socrates, sitting in front a of a computer all day when I could be out for a walk does not appeal any more. I know, from past posts, that he must be , at least, my age and I am going for 75! But that is what it amounts to--in his last post to me, here, he said so.

Another answer for you is that writing has risks but it is what the professionals do. They are more interested in income on millions of pouinds, They know when there is a bubble, spike or what have you that they can take advantage of and we don't. We, on the other hand, having less capital, are after fortunes so the attraction of unlimited profits and limited losses appeals. Unfortunately, most bought calls lose money, That lost money is picked up by the writers.

Take Socrates case. He sold out this morning. The index went against him overnight and closed and bottomed at 6123. He closed very early with a profit. He must have been more relieved than he let on! I bet he missed his Weetabix! Naked option writers take note!

Split

You are absolutely right.

But that is the price you have to pay if you aspire to achieve your objective not from an amateurish viewpoint but from an incisive professional viewpoint, and when I say professional this does not imply you have to work in a bank or a brokerage to become a market professional.

You are also perfectly correct with regard to spikes and bubbles and whathaveyous. Why do we know exactly when these are going to happen ? We know because our viewpoint is not the amateur viewpoint at all, it is a very different veiwpoint as I describe above and the reasons for it.

You are also correct in the weetabix comment. How perceptive of you ...I am sitting here in my pyjamas and dressing gown, as already this morning at 730 long before the opening I KNEW I had to be on station ON TIME.

When I was a junior on the floor of the LSE I was frequently baffled when a senior partner would make the idle comment he would take the following day off to go shopping but that on the day following we all had to be in extra early...as fireworks were expected...and sure enough...he was always right on the button.

These faculties come to us with time, deep knowledge and the accumulation of experience over the years, but I digress. What I am showing here,..... what I am illuminating,..... is exactly what you describe............, the difference between going about operations professionally and that of hitting and missing amateurishly.

That is why the objective of this thread is to clearly prove the Writer has the Edge over the Buyer, no contest.

Thank you for your comments.

 

[CYOF]

You are absolutely right.

But that is the price you have to pay if you aspire to achieve your objective not from an amateurish viewpoint but from an incisive professional viewpoint, and when I say professional this does not imply you have to work in a bank or a brokerage to become a market professional.

You are also perfectly correct with regard to spikes and bubbles and whathaveyous. Why do we know exactly when these are going to happen ? We know because our viewpoint is not the amateur viewpoint at all, it is a very different veiwpoint as I describe above and the reasons for it.

You are also correct in the weetabix comment. How perceptive of you ...I am sitting here in my pyjamas and dressing gown, as already this morning at 730 long before the opening I KNEW I had to be on station ON TIME.

When I was a junior on the floor of the LSE I was frequently baffled when a senior partner would make the idle comment he would take the following day off to go shopping but that on the day following we all had to be in extra early...as fireworks were expected...and sure enough...he was always right on the button.

These faculties come to us with time, deep knowledge and the accumulation of experience over the years, but I digress. What I am showing here,..... what I am illuminating,..... is exactly what you describe............, the difference between going about operations professionally and that of hitting and missing amateurishly.

That is why the objective of this thread is to clearly prove the Writer has the Edge over the Buyer, no contest.

Thank you for your comments.

I am always bewildered as to how you can sum up things so well.

Well, I suppose if we all adopted the same attitude as Japan in relation to our Elders, we would indeed learn A LOT of useful information:idea:

Thank You Socrates.

 

[Profitaker]

Not trying to nail you down splitlink, merely make a point. The point being that if the market moves badly against you, it is better (less risky) to be long option than short options.

I don't for one minute believe those trades are those of old Soc, but rather a banned poster by the name of Bulldozer (well several names thinking about it). He phones him up when he's about to trade and good old Soc tells his audience what he's about to do here. It's embarrassingly transparent, and sad I might add.

In his futile effort to prove a writers edge, he's actually pointed out to everyone how he would have made more money by buying calls yesterday. Since the call buyer would have made more money than the put seller, does that mean the buyer has the edge ?

 

[SOCRATES]

Not trying to nail you down splitlink, merely make a point. The point being that if the market moves badly against you, it is better (less risky) to be long option than short options.

I don't for one minute believe those trades are those of old Soc, but rather a banned poster by the name of Bulldozer (well several names thinking about it). He phones him up when he's about to trade and good old Soc tells his audience what he's about to do here. It's embarrassingly transparent, and sad I might add.

In his futile effort to prove a writers edge, he's actually pointed out to everyone how he would have made more money by buying calls yesterday. Since the call buyer would have made more money than the put seller, does that mean the buyer has the edge ?

Yes, like the sudden appearance of a black swan round the corner again. hahaha...funny.

 

[Crap Buddist]

Not trying to nail you down splitlink, merely make a point. The point being that if the market moves badly against you, it is better (less risky) to be long option than short options.

I don't for one minute believe those trades are those of old Soc, but rather a banned poster by the name of Bulldozer (well several names thinking about it). He phones him up when he's about to trade and good old Soc tells his audience what he's about to do here. It's embarrassingly transparent, and sad I might add.

In his futile effort to prove a writers edge, he's actually pointed out to everyone how he would have made more money by buying calls yesterday. Since the call buyer would have made more money than the put seller, does that mean the buyer has the edge ?

hmmm, I'd say the call buyer warrants the extra return as the risk assumed is typically higher?
Is it to do with edges though?

What , I mean as these are unhedged trades on the options, what would or is the return to date on trading directional outrights of the underlying? And why would one not just trade directional outrights, then maybe hedge with options?


Ahh Is it a question of return on margins, that warrants the use of derivatives?

 

[Splitlink]

Not trying to nail you down splitlink, merely make a point. The point being that if the market moves badly against you, it is better (less risky) to be long option than short options.

I don't for one minute believe those trades are those of old Soc, but rather a banned poster by the name of Bulldozer (well several names thinking about it). He phones him up when he's about to trade and good old Soc tells his audience what he's about to do here. It's embarrassingly transparent, and sad I might add.

In his futile effort to prove a writers edge, he's actually pointed out to everyone how he would have made more money by buying calls yesterday. Since the call buyer would have made more money than the put seller, does that mean the buyer has the edge ?

I think it may be less risky to be with a long future and a written option but, once again, I'd need to prove that to myself.

Certainly, written options covered by shares should be very profitable when carefully traded.

Naked writing, in my view, is to be left alone or the consequences of large losses have to be taken on board.

Straight writing with no hedging are extremely dangerous for writers. You can lose the lot, house, everything.

For option buyers. Limited, known maximum losses but lots of them and few wins. That's my view on them

So, buying hedged options are, in the long run, losers, because most bought options are losers. Hedging trades that lose most of the time isn't going make any difference

Trading hedged written options will make more wins than losses because written options have a better percentage of making money due to time decay. But you have to hedge to protect yourself against unlimited loss and the amount you make is, therefore, limited.

I don't know what else to add that could be beneficial except doing what I do not want to do. Get to work on it and prove my words by, actually, trading. I don't, really, want to end up like those two over there!

Option trading is not worth the time for fortune hunters. You might as well be trading futures.

Split

 

[zupcon]

If you are such an expert Mr Wizard OF ODDS, Mr POST#411, then why don't you TRY and prove that the buyer has the advantage - or are you just been INSPIRED again :cheesy:

Perhaps it escaped your notice, he's not trying to prove the buyer has an edge. Do you actually read anything before composing responses to posts ? For yor benefit, this is what profittaker says in post 4 of this thread.

Sometimes the writer has the edge, sometimes the buyer has the edge, but over the long run neither writer nor buyer has any inherent edge.

Is that clear enough ?

We have proven, in just 1 day, that the WRITER is able to take profits out of the market, and what is more, this is every day, not just one day.

Yes you made 2 profitable trades, a buyer could have actually made more yesterday, but thats a completely academic point, and dosnt address in any way the issue being discussed.

But you, and you persistent limited ability, will do nothing but make ridiculous statements that you are coming out with, and to make it even worse, YOU WILL NOT ANSWER MY POST#411 BECAUSE YOU KNOW THAT YOU ARE WRONG, but not having the laithroidi like ION, you will not even do the HONOURABLE thing and ADMIT IT..

I think that sometimes its just better to ignore a barking dog.

How can anyone ever listen to a word that comes out of your mouth - for you have shown your true colours - AN INSPIRED INTERFERER.

People listen to him, because he presents coherent logical arguments, that can be independently verified.

WRITERS HAVE THE EDGE FOR TRADING OPTIONS - PERIOD.

Back here on planet earth SOME writers have an edge. If this is indeed the case, why cant you answer my question regarding the size of that edge ?

I will continue to EDUCATE you, for it appears that you do well and truly need it..

And you my friend need to learn how to use a spell checker.

Maybe, just maybe, if you go and invite all the Options Market Makers to a party, and give them plenty of free drink and free food, and then proceed to spike their drinks so that they pass out for 48 hrs,

THEN - AND MAYBE JUST THEN - THE BUYER MAY HAVE A LITTLE CHANCE OF MAKING SOME REAL MONEY - BUT YOU BETTER SPIKE THEIR DRINKS WELL - FOR WHEN THEY WAKE UP -YOU BETTER WATCH OUT - FOR ONE THINK THEY HATE - IS BEEN FOOLED BY SOMEONE.

NOW - HERE IS A LITTLE GEM FOR YOU.

I JUST HAPPEN TO HAVE A FRIEND WHO IS A RELATION OF A JCB, AND YOU KNOW WHAT, FOR SOME REASON THE MARKET MAKERS DO NOT LIKE HIM.


I WONDER DOES HE THROW PARTIES EVERY DAY :cheesy:

Boy, what an AMADAIN you REALLY are :idea:

And whilst your about it, read the site guidelines on posting

Kind regards
zu

 

[Jack o'Clubs]

We have proven, in just 1 day, that the WRITER is able to take profits out of the market, and what is more, this is every day, not just one day.

With respect, we are still waiting for that to be proven because as a number of posts on the other thread have pointed out, you would have made at least as much and probably more buying calls (or even index futures) yesterday. If anything the score is 1-0 to buyers. I appreciate the arguments in favour of writing, indeed I voted 'W' on the other post, but as yet the practical demonstration of that advantage is yet to be shown.

 

[Crap Buddist]

You will have to SEEK THE FACTS - no other way :idea:

Do not let others make your choice - for it just will not work - guaranteed :idea:


FACTS - FACTS - FACTS-FACTS - FACTS - FACTS-FACTS - FACTS - FACTS

Cheers, but what I am prodding on is, well the attraction of options trading.

Reduction in risk?
Increased Probability?
The Increased rewards?
The increased Challenge?
A greater Edge.?

Why, Why , Why.

And I guess the answers may well be different for some people, and all i'm doing is looking at it and getting to a point whereby I say, "ahh I see" but at the moment I dont.

Just curious.

You mentioned you could of closed at a scalp yesterday £420. (memory?) what would of been the result based on trading outrights same contracts?

Im assuming that the £420 would be a higher return on margins via the options, hence part of the attraction over outrights?

 

[Crap Buddist]

With respect, we are still waiting for that to be proven because as a number of posts on the other thread have pointed out, you would have made at least as much and probably more buying calls (or even index futures) yesterday. If anything the score is 1-0 to buyers. I appreciate the arguments in favour of writing, indeed I voted 'W' on the other post, but as yet the practical demonstration of that advantage is yet to be shown.

Hmm well yeah, and if the call profit was a greater return on outlay then the call buyer had a better result than the writer. If we are judging it on financial returns. And if the call option buyers risk is known but the writers isnt then thats another pluski to the call buyer?

Now was the call option buyers results yesterday a freak event, cos thats 2-0 to the call buyers?

greater return and limited risk.

Is that right?

 

[zupcon]

Ohhhhhhhhhhhhhhhhh - I AMM SOO SORRRRRRRRRRRRY

WHAT A BUNCH OF GRAPES :idea:

Thank you for your gracious apology. Now perhaps you'd care to answer some of the points that others have raised in a sensible and mature fashion

regards
zu

 

[barjon]

Ohhhhhhhhhhhhhhhhh - I AMM SOO SORRRRRRRRRRRRY

WHAT A BUNCH OF GRAPES :idea:

CYOF

I'm glad to hear it - now do something about it, please. If it wasn't for the fact that I'm not able to give as much time to the boards as i should, I've been unable to nip things in the bud and delete many of your posts as we went along.

But I've lost patience now - so please either obey the guidelines or it'll be rather more than three days before people see you here again.

jon

 

[Profitaker]

And why would one not just trade directional outrights, then maybe hedge with options?

Long stock and hedge with long Put is exactly the same as going long a Call. Same as short stock and long Call is exactly the same as going long a Put. In both cases you'd save some commission by just taking the option trade.

 

[barjon]

I've cleaned up the thread in response to several requests and I'm sorry if some of it seems a bit disjointed now with some responses to deleted posts still there.

 

[SOCRATES]

Look at this ...just when my 74 Gun Warship was about to fire off a huge barrage...the target is suddnly removed.. ..Oh dear, Oh dear...

 

[CYOF]

Look at this ...just when my 74 Gun Warship was about to fire off a huge barrage...the target is suddnly removed.. ..Oh dear, Oh dear...

Yes Socrates- but has this not happened before, several times