Discussion in 'Options' started by BoneFishGA, Oct 29, 2007.
it's called a hedge
That would be a piss poor hedge. Stop loss strat, maybe -- I dunno. I wouldn't want my money to zero out on purpose; flat yes, worthless no.
That's what draws most option virgins into the options game. Lottery ticket mentality. Yet MOST lose money buying OTM options. I'm speaking from experience. I lost more cash buying OTM calls than any other "strategy" I've tried.
I still trade options (profitably) but here is the difference between then and now. When I scan an option chain to open a position I never look at the option "price" column any more, I scan down the "Delta" column first. And of course liquidity goes without saying.
PS: By "scan" I mean visually, the old fashioned way.
Too many iron condors guys? Plain basic hedge against a big move like long spot plus OTM put as crash protection. I think thatâs why they were invented in the first place: not to speculate a big move, but to protect against one.
Put's split the long payoff -- has nothing to do with protection.
Unless you one of the few with special talent, buying cheap OTM options is a losing game. Newbies are attracted to it because of the potential for a quick hit. Unfortunately, that hit is usually on them.
They're more suited as throwaway money when hedging something that has the potential to make more in the center - moderate movement away from strike(s) sold.
Well you are not simply buying OTM options you are selling OTM spreads, big difference and not the same strat . Trying to be wry but it just confuses those who do not understand what you mean...
Right. And illegal aliens are undocumented immigrants.
What ever floats your boat. At least leave the Mexican out this.
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