Question for the option sages who inhabit this part of the ET forums: I've been researching options pricing the past few months and based on what I've gleaned from reading Natenberg, Sinclair, and others, it appears that an option buyer with no edge can over time expect to loose the equivalent of the current risk free rate, plus commish/slippage. (And an option seller can expect to make that rate) ie: If each day at a random time one were to buy an near month ATM call (or put) and hold it until expiration, one could expect to be down by around the current T-Bill rate (plus commis/slippage) each year, on average. Obviously there would be some variation, but after a reasonably large number of trades, the Law of Large Numbers would bring the total losses to their expected loss: T-Bill rate + execution costs. Thus over time, you can expect that the actual cost of any option contract to average out to something like 2%/year. Is this essentially correct? The reason I'm asking is that I'm considering adding options to a stock trading strategy in order to increase my Calmar ratio and protect myself from Black Swans, and am trying to get a handle on how much of my annual returns I'll have to give up for that privilege. ie: If adding married puts to my longs will only cost me ~2%/year, then its definitely something I should be doing. But if the costs are more significant, than it might be too prohibitive. Anyway, sorry for asking what probably is a stupid question; I'm a long time stock trader with zero options experience, and just want to see if I'm completely out to lunch in my thinking. Thanks in advance for any words of wisdom.