In or Out of the Money

Discussion in 'Options' started by BoneFishGA, Oct 29, 2007.

  1. it's called a hedge
    #11     Oct 30, 2007
  2. Why?
    #12     Oct 30, 2007
  3. timbo


    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.
    #13     Oct 30, 2007
  4. ess1096


    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. :)
    #14     Oct 30, 2007
  5. Too many iron condors guys? Plain basic hedge against a big move like long spot plus OTM put as crash protection. I think that’s why they were invented in the first place: not to speculate a big move, but to protect against one.
    #15     Oct 30, 2007
  6. timbo


    Put's split the long payoff -- has nothing to do with protection.
    #16     Oct 30, 2007
  7. spindr0


    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.
    #17     Oct 30, 2007
  8. 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... :D
    #18     Oct 30, 2007
  9. Right. And illegal aliens are undocumented immigrants.
    #19     Oct 30, 2007
  10. timbo


    What ever floats your boat. At least leave the Mexican out this.
    #20     Oct 30, 2007