Exactly. In addition, do you really want to manage a ton of small positions...especially if you're a new trader with a full-time day job? Imagine trying to close or adjust 20 separate trades during a market meltdown.
^This. Unfortunately for them, trading 2-3 vehicles and putting on option trades that last for weeks doesn't make for an exciting show. But the reality is, that is what newer option traders should probably be pursuing.
Yes, I have not figured out how to make big bucks when the underlying is not doing much. Do you have any suggestions for me?
Tasty Trade is based on the assumption that implied volatility is overstated which is false. They actively try to pick up nickles and dimes in front of a steam roller and occasionally lose arms and legs. There are many retail traders that never got away and lost all. The broker TD collects 1.50/option from a liquidity provider to view/take all your orders. Why do you think they would pay $1.50 to see your order when you only pay $1.00 in commissions? The other market makers manipulate the bid/ask spreads to take advantage of you with multiple exchanges vs having one central platform like other countries. If you want to follow Tom's success, build trading technology and sell it to a broker and get rich. If you still want to watch their shows, do the opposite of what they do and you will make money while being wrong more times than you are right. As Tom says, there are two sides to a trade so take the other side if you don't agree but understand the cost of execution or lack of...
Stymie, That is why I gradually migrated to going long. No logic or computations to prove it except I figure going short is so popular that the premium collected were probably not sufficient to take care of all the fat tails.
Ironchef, I started trading options only Long back in 1982 and made money until 1988 when vols exploded after the crash and stayed bid. Then there was almost 20 years where selling premium was more profitable. Since then, books have taught people how to sell premium and make a living and slowly over time implied vols have dropped to a level which is lower than the mid 1980's. This has shifted the pendulum back in 2009 to long option trades again so I am with you in buying options until we see the next big crash.
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Maybe they will even offer an autotrade service where you can see firsthand how successful trade naked, trade small, trade often can be!
Because that's where the best risk/reward ratio is, on the sell side of a transactional business. This is something Levi Strauss learned in the 1800's. He became wealthy selling apparel to California gold miners who needed strong durable pants for their hard labor. Most of these miners went bust, but Levi Strauss got a small piece of everyone's action, win or lose.