Out of curiosity: anyone here consistently predicts market direction?

Discussion in 'Options' started by Aquarians, Jul 26, 2020.

  1. Tradex

    Tradex

    Smart man indeed. :thumbsup:
    Best wishes.
     
    #21     Jul 26, 2020
    odlareg and guru like this.
  2. ZBZB

    ZBZB

    In an uptrend sell puts and buy calls, free speculation.
     
    #22     Jul 26, 2020
  3. ironchef

    ironchef

    Actually less than 50/50.
     
    #23     Jul 26, 2020
    murray t turtle likes this.
  4. %%
    Exactly;
    + if one could really predict, one could own most everything +no one does.Trends can be profitable-- but that is not a prediction.
    .Like speedo says = markets cycle...………………………………………………………………………………..And that is fine getting paid once a week or more; some of the best paychecks come non/weekly, with good trends
     
    #24     Jul 26, 2020
  5. Tradex

    Tradex

    With out of the money calls, the price has to do 3 things if you want to make money:

    1 : it has to move the right way.
    2: it has to move fast enough to overcome the time decay.
    3: it has to be above the strike price on of before expiration.

    On the other hand, when you sell puts the price has to stay above the strike price and that's it!

    So selling puts clearly puts the odds in your favor.
     
    #25     Jul 26, 2020
  6. The problem with this approach is that it usually has a worse Sharpe ratio than just buying the asset. When the asset goes up you make money on the sell-put position but not as much as you would have made by holding the underlier. And every now and then the underlier drops so sharply that your sell-put position is losing a lot. Taking that lot from the already lower-than-market return.
     
    #26     Jul 26, 2020
    murray t turtle likes this.
  7. Tradex

    Tradex

    Yes, but you pocket the premium more often. Plus the market can do a lot of things and you still get to keep the premium money.

    The option seller is just looking for a steady income, he is not interested in doubling or tripling his account in a month with cheap, deep out of the money long put or call options (what I call lottery tickets).
     
    Last edited: Jul 26, 2020
    #27     Jul 26, 2020
  8. drunnels

    drunnels

    I've been asked this question scores of times. I don't have THE answer. I always just say, I don't predict where the market is going, I just try to be ready when it gets there.
     
    #28     Jul 26, 2020
    birdman and murray t turtle like this.
  9. Much easier to predict direction of implied volatility than direction of the underlying.
     
    #29     Jul 26, 2020
  10. 931

    931

    So you predict liquidity?
     
    #30     Jul 26, 2020