03-31-2020, 06:29 AM
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. I think I mentioned I was getting a 2% return for 24HRs of call premium on boring stocks like DOW or one of my sorry airlines lol. I do it every Thursday on 4 or 5 positions. I have no idea why anyone would pay that and lose almost every time.
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The reason is because the options are priced perfectly. Your win rate is what it is "supposed to be" as is the buyer of those options. You get small wins XX% of the time and they get small losers XX% of the time. They get big wins X% of the time and you get big losses X% of the time.
There is no inherent edge to selling or buying options, it works out to be the same over a large number of trades. The edge relies on one's ability to be right. Right on direction of underlying price or volatility. That provides an option trader 2 things to focus on and provides leverage over just outright stock trading.
. I think I mentioned I was getting a 2% return for 24HRs of call premium on boring stocks like DOW or one of my sorry airlines lol. I do it every Thursday on 4 or 5 positions. I have no idea why anyone would pay that and lose almost every time.
[/quote]
The reason is because the options are priced perfectly. Your win rate is what it is "supposed to be" as is the buyer of those options. You get small wins XX% of the time and they get small losers XX% of the time. They get big wins X% of the time and you get big losses X% of the time.
There is no inherent edge to selling or buying options, it works out to be the same over a large number of trades. The edge relies on one's ability to be right. Right on direction of underlying price or volatility. That provides an option trader 2 things to focus on and provides leverage over just outright stock trading.