Interesting article

Discussion in 'Options' started by Maverick74, May 13, 2004.

  1. Maverick74


  2. Interesting indeed. I always thought that was the case but hesitated to go into options writing because I read in "Winner Takes All", that over the long run, there is no advantage being a seller. This article definitely gets me interested again.
  3. ig0r


    I think one would need more information regarding how exactly the study was carried out, for example, were they counting options that were way out of the market and only traded a few contracts a day?
  4. ktm


    The brief article looks oversimplified to me. Statistically, of all the existing strikes, half expire worthless (that is, those strikes issued as available by the exchange). There is a heavy bias toward those contracts in the money being closed out. If I write a straddle 30 pts out each way on the SP and we move down, I will roll down. What happened? Those puts that were in the money for me are now vapor. I own a bunch more that are out of the money and that's my goal at expiry - to have near 100% that are out of the money. I may or may not close out the far OTM calls, but a lot of people don't.

    To me the statement about 3/4 expiring out of the money is a self-fulfilling prophecy. I would suspect a large piece of the 1/4 that expire in the money are small amounts or part of a hedged position.
  5. agrau


    As if money can only be made at expiration with the option being ITM.

    I wonder why such a "study" is being published. Who has interests in demonstrating the seeming dangers of options? Then we'll probably better understand. For the time being this is just a funny read for me. I never realized I was playing with fire :D Call me Red Adair :p
  6. %%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%

    Interesting article;
    & at least the writer wisely noted his small sample of 3 years
    and skillfully helped some avoided a trap related to that.

    On a strictly more fun note he could have mentioned what some consider to be a disadvantage of ITM- they co$t MORE.:D

    Others may begin to question thier buy
    & hold guess;
    questions & related plans can be helpful.

    Divide you merchandise amoung 7 ventures,
    8 maybe,
    since you do not know
    what disasters may occur on earth.

    Solomon-trader king.

  7. ktm


    It's not really a study as much as a book promotion.
  8. This is a blinding glimpse of the obvious. Because of the "insurance" nature of options there will be many cases where both the buyer and the seller are better off with the option expiring OTM. Hence the bias towards that direction.

    Thanks for the post, Mav.
  9. hjcolvin


    another good take on the option selling strategy would be to know how many options were sold and then bought back at a percentage decrease. For example, sold for 1000 and bought back for 800. The reason this is more interesting in my mind is because it is rare to hold and option to expiration.
  10. %%%%%%%%%%%%%%%%%%%%%%%%%%%

    Probably was the intent;
    probably buy his book @ non retail.

    I am going to have to be more careful;
    lest I agree with all these'' option writers ''
    too much.

    Here is something i always thought has been absurdly misleading about only 25% of contracts being profitable,75% being unprofitable.

    Sure profitable buying is complex, made more so with decay;
    but many people who havent thought it thru imply 25% average profitable buying
    is bad business .

    Disagreee with that 100% ,
    look at all the good & profit happening with the free enterprize system with only 20% of businesses profitable & 80% unprofitable /failing.


    Interesting what many millions have done for years with''only'' 20%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%

    Divide your merchandise amoung 7 ventures,
    8 maybe.
    Solomon-trader king
    #10     May 13, 2004