[QUESTION] - Options trading for INCOME

Discussion in 'Options' started by Tall Mike, Jun 27, 2020.

  1. Tall Mike

    Tall Mike

    Hey ET Community,

    Noob here with a noob question.

    Why do beginners or the general public think that options trading can provide you with INCOME? Just like trading any other instrument you P&L and risk are going to fluctuate just like with any other position. Why does everybody think there is something magical about options that can provide you with a stable income as opposed to any other type of trading?

    Maybe I am missing something, am I thinking about this the right way?

    Yes, you may receive an initial "credit" upfront, but the position can still move against you and you can still lose money just like you would see with any other type of trading... equities, futures, forex, etc.

    I would appreciate some clarification or anybody that trades options to weigh in on this.

    Thanks, guys!
     
  2. zdreg

    zdreg

    The public is greedy.
    The public thinks they are smarter than the traders on the floor.
     
    luckyfnlou and Tall Mike like this.
  3. Tall Mike

    Tall Mike

    So I am thinking about this the right way then, correct?
     
  4. hilmy83

    hilmy83

    You can earn income selling covered puts on consumer dividend stocks
     
  5. guru

    guru

    I believe you’re right.
    The concept of options trading for income could come from various gurus offering training and therefore needing something to offer. And in bull market there are long-stretches of time when it works, so you’ll always find some people making money and then discovering they can make even more money by training others.
    And it’s actually same with any business. You can probably “sell homes for income”, “flip homes for income”, “sell products online for income”, “sell on eBay and Amazon for income”, etc etc.
    And actually all and any of this may work for 1% who are true pros who manage their business 100x better than everyone else. Even venture capitalists invest in people, not in concepts, because smartest and hardest working professionals will find ways to money where others won’t.
    Though they probably wouldn’t just sell options for income systematically.

    Btw, there is a proof of what you said since there are various put-write ETFs and indexes that do exactly that: sell options systematically. Their returns are usually identical to simply holding the underlying, with minor fluctuations.
     
    TooEffingOld likes this.
  6. guru

    guru


    Yeah, right. What are you smoking?
     
  7. hilmy83

    hilmy83

    Hookah how bout you?
     
  8. guru

    guru


    Fresh air.
    Once you stop smoking crap, provide a research, paper, or backtest showing that your claimed approach makes more money than simply holding the underlying(s).
     
    Last edited: Jun 27, 2020
  9. Tradex

    Tradex

    More money?
    He never said that.
     
  10. guru

    guru


    But I said it. Because the OP and everyone else isn’t interested in selling options for income when holding the stock(s) produces same results.
     
    #10     Jun 27, 2020
    VPhantom likes this.