Do you always assume 100% loss when you long an option?

Still sitting here with the open market order...

Update: got a partial fill. How come I see 22 bid size @ 0? Is it possible to make bid at 0?

 

If you have long options that are nearly worthless you can keep them a s "lottery tickets", and sometimes you can get lucky.

 

closing them out when they are that low is barely worth the commission you are paying

 

For me, and my acct. Usually no. If the underlying is not doing what I intended or the catalyst has changed, I cover. I am not into lottery tickets.

I like to have "mental capital" at the ready, and if I am keeping track of a .25 option that was once 1.00, it doesn't let me focus on making money in other trades.

Lastly, if I have a 10 lot @ .25/contract. That is still $250. If I write off $250 every month to lottery tickets, after a year that is $3000. It takes away from the bottom line. How many times have I won the lottery? Option lottery - maybe twice in the past 36 months.

I was at a seminar and talking to a seemingly wealthy guy. I asked him how his trading was going. He said, "Not very good. I am still getting the hang of it". When I asked him about his previous month's trading, he told me how a few trades were up nicely, and have now lost 75% of their value. And he was just going to "hang on".
Hmmm, I just have a tough time with that one.

 

I was referring to long options that are near worthless with "bid size @ 0" with a "hope to get filled at 0.05", and not options at 0.25 .

 

There is no “lottery ticker” concept in options. ITM , ATM , OTM and yes , DOTM positions carries the same r/r profile over a long term. Just like heavy favor vs long shot in horse race. If one can pay 5c for a 7c fairval , he will be ahead in the long run. And you will NEVER find this discount at ATM

 

Yes.

I think a lot of traders (especially new ones) think that they can adjust their way to profit but IMO it only leads to wiping them out faster due to trading costs, spreads and yinging when they should have been yanging. :eek:

Joe.

 

When it comes to any security I never assume anything. I know for a fact that the underlying stock can only go up, down, or sideways. I have a plan for each of these eventualities and review and udpade my plan on a regular basis.

Remember what JP Morgan said many years ago when asked what he felt the stock market would do. His response was that it would fluctuate. As options traders, this inevitable fluction is right in our wheel house. So, take risks, manage and evaluate those risks, and don't be afraid to take a loss. "Nothing will ever be attempted if all possible objections must first be overcome."

Good luck all.

 

I used the term “lottery ticket” in the context that was specifically “quoted” in my reply, therefore all he can do is dump those worthless options for nothing, maybe even at a loss depending on his commission structure.

Why give something away for free?
Why not keep them?
There can be some overt news in the future and few months down the track his worthless options can became very profitable.

However mys logic is based on a concept that R/R profile of option trades changes over time