Buying calls versus spreads makes no sense.

Discussion in 'Trading' started by wxytrader, Jul 8, 2024.

  1. (July19 20 call strike @ .88)
    The cross section here is your BREAK EVEN @ expiry. Like wtf???? Unless you get lucky and catch a huge gap up you can kiss that money goodbye. :)
    upload_2024-7-8_6-19-34.png


    Turning it into 20/21 vertical spread makes it marginally better by cutting costs, and you are only capping gains that were statistically not in range anyway, but still need the stock to move pretty consistently in your direction JUST TO BREAK EVEN!

    upload_2024-7-8_6-28-1.png

    None of them perform better than just buying the underlying.
     
    Last edited: Jul 8, 2024
  2. traider

    traider

    u make no sense
     
    ironchef and ktm like this.
  3. Look at the numbers! Show me any strategy that can out perform holding the underlying? lol.
     
  4. When you think about it, buying options for profits is essentially gambling because you're forced to take a loss.
     
  5. ironchef

    ironchef


    The devil is in the details: You need to look at the details, timing, entry, tte....
     
  6. Timing is not enough. Even if you got the direction right you will still lose money. The only way to make money buying calls is an outlier event ie a gap up.

    They are priced with the expectation that the stock can move 1 SD. But it can move in either direction so it rarely will go 1 SD in one direction, yet you are paying a premium based on it moving 1 SD. (I believe TT did a video on this phenomenon as well) And even if it does move 1SD in your direction it will likely be a break even situation at best.

    Purchasing of options were intended to protect long and short underlying positions from outlier events...not to flip for money...this is why trying to profit off buying them is futile.
     
    Last edited: Jul 9, 2024
  7. ironchef

    ironchef

    May be so but I have been buying them since 2014.

    To each his own.
     
  8. taowave

    taowave

    Sounds like numnuts is advocating ratios,but is too dumb to realize it...