"I've come to the conclusion that there are no retail options traders who consistently make money" That statement is absolute BS, just like cgarcia saying no daytraders make money.
I do it for the ability to limit risk, and one feature that really makes it nice: it adds on to your position when it's winning, and subtracts from a losing position. Which means: gamma increases/decreases your delta as the price moves towards/away from your position, automatically increasing your exposure. Keeps you from making the mistake of not adding to a screaming winner. Also have been learning, gradually, the art of trading IC's, which puts you short gamma, which is a scary thing. The returns have been impressive so far (but I've been using a different distribution than the standard-issue Gaussian to set the strikes; the probabilities are different and, based on historical results, far more realistic), but I know there's a surprise waiting around the corner for me. So, at this point, I'm mostly trying to figure out the best way of hedging against extreme moves. From what I can see, only experience (which of course will mean having to lose some money along the way) will tell me for real. Everyone seems to have a different method.
The max risk with short (calls/puts) SPY or IWM is that the ETFS go to 0 Although if SPY is trading at Zero I doubt the first thing I would be concerned with is the markets at that point, I would probably be loading the shotgun to fend off the coming Zombie invasion.
Hey King: How are you doing? I have not seen your lottery threads lately. I like your posts. Do you give some of the puts money to the Queen?
You're kidding of course. Your rant is probably just venting frustration, but don't dump the baby with the bathwater. Successful option management isn't a recipe you follow, although there are elements of same. It's not for sale in the way you think. Rest assured there are numerous retail traders that profitably trade options. But don't confuse "retail trader" with someone with a $2K trading account with a late-night infomercial mindset. Retail can mean substantial AUM despite the pejorative connotation it evokes.
I've come to the conclusion that there are no retail options traders who consistently make money. That's an invalid conclusion. If you don't know of them, that doesn't mean that they don't exist. I don't know many traders but I know one who consistently outperforms the S&P with options. Me? After years of heavy option trading (retail) I've moved to high vol 4:1 PDT equity trading because why struggle with chess if you can make it with checkers? W/O a doubt, the option B/A is a skimming operation. Add delta and IV and you've got a lot more on your plate. But they do give you incredible flexibility, providing many ways to try to skin the cat (aggressive, conservative, traing volatility, etc. Hedging: the best form of hedge is going to cash. Leverage: I can get plenty of movement on my equity curve with margin alone, I don't need options to give me more anxiety. Non-directional, uncorrelated income: again, cash is non-directional and uncorrelated. Don't try to make trading more complicated. That's a matter of opinion. I don't think cash is the best hedge. For ex, an investor with equity cap gain can collar at no/near no cost to hedge and hang in there. Spreads can protect against Black Swan events (market or individual stick news). Etc, etc. If options give you more anxiety then they're simply not for you. After pedaling furiously with them, I feel the same about futures. To each his own. Back in the days of the 2003-2007 bull market, this guy got hundreds of comments per post, many of them by housewives. These days it's a bit more sedate at the Addict's site. No indications of a track record, but t-shirts are for sale. What's the relevance of number of comments or gender breakdown of posters? So my point here is that there's no evidence any of these people are making money . . . and every reason to believe that they're not. What does a finite sample prove? You make some good points but dogmatic conclusions are no more than that.
At brunch today I met a noob who just completed a 7 full day intro to trading course for 5 grand. Nice bright guy (mid 50's) wanting a secondary income source to his part time consulting work. Without a doubt he got a fast track book learning curve on trading (TA indicators, patterns, candlesticks, sentiment, etc.) but nothing he couldn't have gotten from the web, a coupla hundred dollars of used (g) books and some time. He's now paper trading. After chatting for 3 hours, I didn't have the heart to tell him that I think he gotted ripped but I hammered him with when he gets to real money trading, trade small and trade what you can lose. Hypothetically, if it's 10 grand, when gone, go back to working full time