Who is really making a living trading options??

Let's all join in a circle and sing Kumbaya.

The premium in OTC, and more recently in listed options, originates from a vol-figure. Premium doesn't beget a vol-figure simply because they're freely exchangeable. It's really not a "chicken or the egg" scenario.

Ask yourself (stated in this thread frequently) how you would derive the premium on a bespoke (OTC) contract w/o a volatility figure. Ask yourself where you would get it.

 

In a feeble attempt to add something to the thread, I can say that I and a few others I know make a living trading options. We don’t do it without risk and a lot of hard work, and we don’t attempt for over the top returns. To throw out some numbers: even if you are really good (and lucky) and average 30 or 40 percent a year, then assuming you consider 100k/year as “a living” you would need around 300k in true risk capital, and to have that you should probably have at least a million dollar net worth.

I can tell you that I thought I knew a lot about options, traded for years, read books, and studied many different things. Then I became an option market maker and eventually realized that I had known nothing. Now after a couple decades I am wise enough to know that I know very little, and just try to do the best I can. Personally I don’t differentiate between option trading and vol trading, I consider them the same thing. I also don’t spend any time trying to come up with analogies for the option markets and its participants nor do I try to simplify anything within it. Trying to oversimplify or come up with trite explanations for a relatively complex process does more harm than good.

As retail, off floor, option traders without access to phd programmers and supercomputers we have to be right about something to make money. Therefore we have to take risk and be correct about something. How much risk we take, how we manage that risk, how much leverage we use, and what we choose to try to be right about is what matters.

 

"Ask yourself (stated in this thread frequently) how you would derive the premium on a bespoke (OTC) contract w/o a volatility figure. Ask yourself where you would get it."

Atticus raises an excellent point here. Almost all my comments are for "liquid" options markets and from the retail speculation point of view. To continue reasoning in to illiquid markets we would need to look at the central limit theorem and statistics.

For the ops: Several real option traders have basically given away their method for free in what they have said but you need to pay close attention to their posts. There are many excellent past posts (mine excluded apparently).

There is no entrance exam or PHD needed to trade so verbal fluency, communication skills, IQ, EQ and the like are not needed. Those who will listen will hear if there is anything of value to hear.

Good trading.

 

Really? How can you say that without knowing anything about who made those trades and why?

 

Notice the use of the word "would" which denotes, if I am not mistaken, a subjunctive mood...

 

I didn't think you had a good answer.

 

It requires HS grammar. Thanks for coming. Bye now.

 

I see you don't have one either.

 

MACD ->

"If you can't write out your edge in 3 sentences or less -- You probably don't have an edge"

So what's your edge?

 

"I am not very smart, but I can lift heavy things" (c)