Adding to ironchef's reply... From the CBOE: The CBOE's BXM index represents the returns of a monthly buy-write strategy where the S&P 500 is bought and one at-the-money call is written. Over the past 30 years, the S&P 500 has returned an annual rate of 9.9% with a standard deviation of 15.3%. The BXM has returned 8.9% with a standard deviation of 10.9% The CBOE's BXMD index represents the returns of a monthly buy-write strategy where the S&P 500 is bought and one call 30% out-of-the-money is written. Over the 30 past years, the S&P 500 has returned an annual rate of 9.9% with a standard deviation of 15.3%. The BXMD has returned 10.7% with a standard deviation of 13.2% These stats belie the claim by SJOptions that trading options is a losing proposition. In neither case did the trader/investor lose money over the long haul. The BXMD outperformed the market.
When IV is higher, spreads offer a greater credit and therefore lower risk. So that implies that selling is better than buying at that time. But with higher IV, you get higher delta and therefore, the likelihood of greater movement and more binary results (win or lose) so does the latter offset the former? Since I am a finite set (I'm not trading all 500 SPX components), more random results would push me toward buying over selling. And since I'm not statistically clever enough to know that answer, I'm just guessing. Unless one is selling puts to acquire stock or buying long options out of outright directional conviction, I'd recommend spreads at all times.
%% If one has to use leverage; options may work. but who gets the dividend-hint its not the option buyer?? Options is not like getting the mail @ all, in auto ;actually the US PO uses autos all the time to get mail................................................................... I am glad i bought some option books before i did them .One good idea is worth the price of most books; even though one few books i returned was daytrading options. I know many have made real money with REAL ESTATE options; but i never did that =too much leverage for too little time for me.
%% Many times its not; tek stocks for example But if they pay dividends i want it if i chose to hold it long enough
Makes no sense to me since it's yield not total return and if non sheltered, it's an unnecessary taxable event. In addition, it's priced into the options.
What is the title and author of the book on day trading options? I like to learn how to day trade options. Regards,
First you need to learn about options. Try "Options As A Strategic Investment" by McMillan. You can pickup a used older version for $5-$10. Buy the more expensive latest edition if/when you graduate to more sophisticated strategies.
One thing that I don't think has been mentioned on this thread is that you can skirt pdt rules trading options much more easily than with stocks. For example if you have a view on direction trade a call vertical and instead of exiting box it off with a put vertical. Unwind the next day (avoiding pdt) or just hold the box til expiry. Similarly for a view on vol, trade call fly and offset with a put fly (two boxes). N.B. some slight pin risk on the hold-to-expiry vs unwind the next day, but lower transaction costs. Edit: forgot to mention that if a stock you are daytrading (using options) is about to go ex-dividend you may risk getting assigned on the hold to expiry.