What Did You Buy Today?

[crimsonghost747]

(02-16-2019, 02:20 AM)fenders53 Wrote: What Mike was stating earlier is WE pick our buy price, and we won't pay more.  If the premium does not meet our risk reward, we simply don't sell the option.  Obviously there is risk in giving somebody a month to decide whether they force you to buy their shares and I'm not giving that away too cheap.

It's really hard to try and convince you that you haven't found the golden way to happiness and eternal fortune where every trade ends up in a profit. Because you truly seem to believe that in any case this is a winning strategy. I'm just trying to point out that to my understanding there is not a single strategy that is always the winner, and it's definitely not always the best way to do things.

I just did the math for you for shorter term, the one with options A, B and C. And as you can see you need to be pretty good if you want the majority of them to end where option B is the most profitable one. If you look at the past, what percentage of your puts ended with the price in that window? And it's hard to hit that window... like I say I trade with short term options all the time. And it has been very profitable but looking at what I'm doing with some skepticism, I can see that there are times when I would have made a lot more without the option being there to dictate what happens.

My most recent trade is a good example: I made 1.1% in 4 days with a covered call. Pretty damn good huh? Say it took a whole week (because there is no trading on weekends) it would still be over 50% annualized, a number that any sort of a financial professional would have wet dreams about.
BUT. Had I just bought 100 shares and forgot about the call option, I could have sold them in 4 days for a profit of 3.5%, over three times more. 
Yes the trade was profitable but it was a really stupid trade to make compared to my other options. After all, I had a feeling it was going to go higher, I wouldn't have entered the trade if I didn't.

On a longer term... well I guess you will just have to wait and see. But as I said, the general direction of the market over the long term has always been upwards so "leaving the stocks on the table" with companies that you want to own can get very expensive. For example now, despite the fact that you claim not to chase a stock, your put on KO has a 21% premium and your put on SIX has a 30% premium to where they were 5 years ago. We are not talking about ancient history here either, 5 years is a relatively short time frame for investing. If someone was contemplating between buying the stock and selling a put back then, I sure hope they just bought instead of missing out on those gains because their put didn't get assigned.

I am very much a believer in the fact that if you choose your companies correctly, then over the long term it doesn't make a big difference if your entry point was $45 or if you managed to bring it down to $44 with a succesfull option strategy. Sure the latter is better, especially if you can do it consistently, but is it worth potentially missing out completely?


Long story very short: Just because you made a profit it doesn't mean that it was the right move to make.