Buying Naked Calls

Discussion in 'Options' started by Bushwacked9, Nov 9, 2019.

  1. Baozi


    that would work wonders, however, the biggest issue is to define the uptrend in a clear, objective way.

    And, as a corollary, if the uptrend is really strong why not going directly with the underlying?
    #181     Nov 16, 2019
  2. Wheezooo


    ??? Doesn't that mean you'll be buying at the money's???
    #182     Nov 16, 2019
  3. Close to, yes
    #183     Nov 16, 2019
  4. ironchef


    I am new to options so I shouldn't be giving you advice but here is the thing:

    Maverick74 who no longer posted drilled this into my head: There is no edge buying or selling options, everything is priced in, to win you need to be more correct than the MM, your counter party and the market.

    If you buy ITM options, you want to compare it to buying the underlying on margins. Sometimes buying on margin could be less expensive, depending on margins interest vs extrinsic premium, time decay and timing. If your opinion of the underlying is correct, often it is more profitable to go OTM, even with higher probability of your options expiring worthless.

    I started out ITM but over the years actually moved more and more to OTM and even DOTM.
    #184     Nov 16, 2019
  5. TommyR


    there is edge in buying the 2 delta wingers before a TT
    #185     Nov 16, 2019
  6. ironchef


    Did you mean 2 sigma?
    #186     Nov 16, 2019
  7. taowave


    And why would that be true? Sounds like someone is a punter and loves his wings:)

    100 dollar stock,you are suggesting that intrinsic value< 1 (1%)for any option selected for a directional bet?

    So basically its ATM and higher (in the case of a call???)

    And this is a blanket statement regardless of the level of implied vol???Hmmmm...

    Secondly,are you suggesting one 40 delta call is a reasonable substitute for an 80 delta call,or would you buy equal deltas?

    If you suscribe to this,is it safe to assume that one favors backspreading over ratio-ing???

    Which brings us back to implied vol....

    Last edited: Nov 17, 2019
    #187     Nov 17, 2019
  8. taowave


    I am not following your ITM and Margin theory...

    Are you suggesting I can buy a deep call,short stock and have a riskless arbitrage??

    Are you suggesting that if your broker is jacking you on their margin rate,it may be better to buy a deep call with a "lower imbedded" interest rate?

    Extrinsic premium = implied vol...Yes,buy options in low vol as opposed to high vol

    Once you start with margin interest vs extrinsic premium,you are on a very slippery slope with one foot on a banana peel....

    You guys need to simplify and fully understand what you are saying...

    You guys realize you are saying you prefer backspreading,i.e buying 4 .15 delta calls over 1 60 delta call...

    When you look to buy call/s to trade directionally,what leads you to OTM/DOTM vs the higher deltas..And please,no margin craziness:)

    #188     Nov 17, 2019
  9. ironchef


    Yes, I used to buy the underlying on margin, expensive, often suffered from margin calls and forced to liquidate. Then I found out in many cases I was better off bought calls, exchanging expiration for margin call so I didn't have to liquidate at the worst possible moment.

    Can you kindly explain this? Us retails pay expensive margin interest rates.

    Didn't know this is call back-spreading?

    Why I do this? By trial and error I found it more profitable.

    Thank you.
    #189     Nov 17, 2019
  10. T-Mex

    T-Mex Guest

    Appreciate your input here on frauds, sadly most people just can't see the obvious...
    #190     Nov 18, 2019