All these discussions are useless , unless trading phsychology is included , in these discussions . We all suffer from 1)Self sabotage 2)impatience 3)greed 4)emotions /emotional hijacking /amygdala hijackings 5)stress responses reactive trades 6)informations processing delusions 7)Need to be right 8)Trading phsychosis 9)other phsychological wiring flaws related to trading. 10)acceptance of losses /loss grieving etc 11)getting smart for own good 12)Dunning Kruger effect
Writing/selling options for the relatively small instant premium collected is like betting on 95-99% of the numbers on the roulette wheel__/ Do you feel...Lucky...or you might step on a land mine `
Are there any fundamental difference between selling naked calls vs covered calls? I mean in terms of how you would manage the trade once it moves away from you, like the example I used when I sold BAC covered calls and naked calls and the stock popped $4 after Trump won the Presidency, went from $16 to $20 in a couple of weeks. True, but they were looking at and comparing cum returns:
I post that the MM post correct IV and that it all works out fairly in the end. No advantage for buyers or sellers.
Euan Sinclair wrote an excellent book about trading options called Volatility Trading. The central premise of the book is - don't trade options unless you have a view on volatility. Otherwise you get the risk-free rate over time, minus transactions costs (and with a lot of volatility).
The entire options game is a zero sum game. Actually I take that back, it is a negative sum game because of commissions and spread. The only true winner in the long run is the MM(casino). The question you should be asking is, how do you beat the dealer?
Zero-sum is a situation in game theory in which one person's gain is equivalent to another's loss, so the net change in wealth or benefit is zero. A zero-sum gamemay have as few as two players, or millions of participants. Take a look at this support No reason why you can not make money writing , with two months to expiry , below the support . Dax 9900 put dec 29.5 to buy Jan 9950 puts .... 89.2 to sell Chances are it will go to <50 on expiry in or 3 weeks , probability trade. potential profit 20.5 less costs to close Your worst risk on this trade is , the price moves near the short option and option premium rises to 200. Net potential risk is 130 , but probability is low. You have to have some fundamental and technical bias to your trades.
It is not the MM I am trying to beat. It is someone else - the market. My point of reference is the SPX. If the stock market is completely random like in a casino then I am doomed. However, there is an up bias trend, there are non random events (fat tails)... So, hope springs eternal. In the casino, most games are random and you mostly play against the house and not one another. And even there, I bet you one can model a specific roulette table and determines its biases since it cannot be a perfect mechanical system. In any case, I am intrigued by some of Trading Education Buyer's posts. I don't think he is crazy. He got me thinking.... Regards,