Intra Day Trading Options

Instead of guessing the direction, just write the option. You'll have 66% of winning.

I've been doing that for passive income.

(Note: The above is not a recommendation for naked writing)

 

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Odds aren't bad. Even the best traders reports a P/L of 60/40 %. Clear the baloney and I think a good trader can make 40%
I have a feeling the iPhone 7 will fail miserably. Time to buy some October 2016 puts!

 

I always have trouble forecasting that far and also don't like to pay time premium. Kudos to you.

 

Really? Once upon a time I tried day trade AAPL.... No success. How did you make it so easy?

Thanks for your reply.

 

How did you come up with the number of 66% winning for going short? ATM? OTM? ITM? Any M?

Thanks.

 

Well, let's say stock XYZ cost $50.

You believe it'll go to 55 in a month. Here you guess a direction (up) and magnitude (10%).

Normally, direction up/down is a coin flip (50/50); assuming uneducated.

In addition the option buyer has to predict the magnitude of change. Hence adding uncertainty.

As an option writer, I love selling you premiums and time deltas.

In contrast, when buying stocks one only choose a direction.

 

I still don't understand how that added up to 66%

 

Did it hurt when you pulled that number out of your ass?

 

You are right, I was wrong. Seems the number of options expiring worthless (which you want) is much higher.


"Studies (and experience) show that the options buyer does not have a 50/50 chance of winning. They actually have a very high probability of losing. A study done using Chicago Mercantile Exchange (CME) data showed 83% of all options on stock indexes expired worthless.

Remember that there is a winner for every losing options trade. If the buyer loses on 83% of these options that means the sellers win that often.

We can even tilt the odds in our favor slightly more by looking at whether call or put selling would be more profitable. A call option gives the buyer the right to buy the underlying stock and a put optiongives the buyer the right to sell the underlying stock. Call buyers profit when prices go up, while put buyers profit when prices decline.

CME data showed that 60% of calls expired worthless while 94% of puts expired worthless. This data shows that selling puts has a high probability of success."

 

Also, personal example. Sold SRPT C22.5 contracts earlier this week for $160/each and now it expires worthless.