I'm not an expert on options by any stretch... but it seems to me "writing puts" is not a "12%/yr proposition"... more likely to be good for 2-4% over a year.. not counting the time(s) when you get exercised for a loss.
You are correct. That will happen. And the problem with selling options on any instruments is that inexperienced traders will often have a few months of success, get complacent, start to push the envelope, and BANG. They're dead. So going forward, you must plan for the worst-case-scenario and be positioned to survive it. If you honestly build in the worst-case, and ALWAYS remain conservative and safe in your positions, planning and expectations, you may have a shot.
They do not have the knowledge, nor the time to do it Time to study and monitor and execute the trade etc..They can earn much more managing their business. This type of question can be made for everything. Just accept the average return, accept average wage. People make 10.000 % returns on invested money in business, and yet not everyone is doing it. I think it is the same in trading/investing. If you want above average returns, you have to take bigger risk, but also learn and study markets etc.. As for the hedge funds etc, I think problem can be liquidity..
Not quite. Most businesses that make enormous returns have an edge. They know something the others do not. They don't just start and hope for the best while applying the standard methods. There are plenty of people with money interested in options trading and they have the time as well. So the view that they just are too time constrained is invalid. Studying market is worthwhile and this is where the edge part comes in. However, without finding anything significant, it's of no benefit.
This is what I meant with time. To study the markets and find your edge. This usually takes a lot of practice, trial and error .. Books help, but we mostly just ignore the advice until is burns and we learn the hard way.. So a lot of trades, lots of patience and hope to endure through it all with capital But ok, guess lots of people never actually find the edge, spin their wheels and sooner or later return to good old buy and hold
Options are not extremely risky nor are they to be avoided if someone is risk averse. All depends on the strategy and how they are used. I cannot stand this constant repeated misperception about options. I don't like risk so I avoid options... Let me say that selling naked options or selling credit spreads on indexes is the furtherst thing from risk averse...
It's relatively easy to make 1%/month selling options for that instant insurance premium collected. They say after all that more than 90 or 95% of options bought expire worthless, w/o exercising. That's a fairly safe strategy to be the Insurance agent company. -- just hope and pray though...that the roulette ball doesn't land on you, and you have to pay out on that insurance claim. That scenario would just hurt your overall return potential average. 1% a Day is possible as well, if you simply buy them and have great timing and trade management capabilities and market wisdom. This is ET, who the heck trades here to make just 1% a month. -- I say aim higher, 2018
But its income, Everyone likes income, and there are so many friendly web sites that will sell you a service to help you gain that precious income. I've noticed how many so called option experts have something to sell.