Any studies on who normally wins - option writer versus purchaser?

Discussion in 'Options' started by Saltynuts, Feb 25, 2018.

  1. Pekelo

    Pekelo

    Alrighty, so if an option contract changes hands let's say 20 times between its birth and expiry, does OI tell you about the P/L of those 20 people holding that very same contract for shorter or longer period of time? Hell no. That same contract counts as 1 in OI and it tells shit about for how much it was bought and sold while it existed.

    Now you tell me there is any validity to your OI stats. :)

    Not to mention the already mentioned connection to stocks, without knowing the full position, one can lose on puts and still make money if the stock rallies like crazy.
     
    Last edited: Feb 26, 2018
    #51     Feb 26, 2018
  2. tommcginnis

    tommcginnis


    You might want to read the original post.
     
    #52     Feb 26, 2018
  3. Pekelo

    Pekelo

    I did, there was nothing relevant in it. You might want to state a new argument.
     
    #53     Feb 26, 2018
  4. tommcginnis

    tommcginnis

    To grant *your* argument anything beyond, "methodologically vacuous" would be to infer that if I bought TSLA at $200, and sold it today @ $357, I did *not* make $157, or 78.5%, because I did not take into account the myriad, Mandelbrottian moves over the last year or two. The OP did not ask the inane "Do prices in markets rise and fall?" -- the question you implicitly answered.

    Yeah? Really? :rolleyes:

    Thimk.
     
    #54     Feb 26, 2018
  5. Pekelo

    Pekelo

    Oh boy this is going to be a long day....

    In the above example did the TSLA stock changed hands 20 times? No. Here is how the example would work using only 2 traders:

    1. You buy TSLA at $200. You sell it to me at $250.
    2. Price goes down to 200 where I sell it at a loss to you and you hold it until 300.
    3. At 300 I buy it from you, and hold it down to 250, where I sell it again with a loss.
    4. You buy it from me at 250 and hold it until today.

    Now knowing that you bought Tesla first at 200 and today it is at 350 and you still have it, one could mistakenly think you made 75% on it. And nothing is said about my loses. Yet you actually made 25% + 50% + 40%=115%

    So again, just knowing the OI doesn't tell us SHIT about the holder's profitability.
     
    #55     Feb 26, 2018
  6. tommcginnis

    tommcginnis

    And yet somehow you managed to draw relevant borders around periods of ownership, to conclude a gain for one party, and (implicitly) a loss for the other.

    To borrow a phrase, "Brilliant!"
     
    #56     Feb 26, 2018
  7. ironchef

    ironchef

    rtw posted a link which had this table:

    upload_2018-2-26_12-37-6.png
    Based on this, one can infer that writing put is a superior strategy than buying put, and writing call is also a superior strategy than buying call. Overall, writing put produced the best outcome.

    This is when writers and buyers both have no opinion of what the underlying will do going forward and mechanically trade.
     
    #57     Feb 26, 2018
  8. I can assure you some of those stats are based on very loose, maybe dumb, averages.
    A person with directional skill and trade management and market wisdom can easily surpass those buy % return stats....in a Day.

    I'm pretty sure I'm considered an 'outlier' though... from a given, huge, random, collection sample, o_O
     
    Last edited: Feb 26, 2018
    #58     Feb 26, 2018
    ironchef likes this.
  9. If you're levered, you cannot infer anything from this table alone. You'd need to know the other characteristics of these strategies.
     
    #59     Feb 26, 2018
  10. ironchef

    ironchef

    I hope you are right Mr. lawrence-lugar. For the past year I stared at charts everyday to learn how to get better at directional skills.:banghead:

    Any suggestions?

    Best to you.
     
    #60     Feb 26, 2018