Why do you guys trade options?

Discussion in 'Options' started by Chronos.Phenomena, Nov 17, 2010.

  1. Can you give your three top reasons?
  2. emg


    1) cant handle the heat day trading futures/commodity
    2) option traders like to collect premium when going Naked
    3) no intial margin to buy and hold vs futures
  3. Here are 4:

    1. Predetermined maximum risk.
    2. Doesn't require you to be glued to your screen hours a day.
    3. More powerful and complex strategies to make money in any market.
    4. Eliminates the problems of using "stop-loss" orders. (ex: Gaps past your stop and getting stopped out early)
  4. Leverage. Options on futures are a derivative of a derivative. You an control, or have rights to, $250,000 worth of stock for a few hundred bucks and your only risk is what you put in (no margin).
  5. rew


    I can make money betting where an asset price *won't* go, which is difficult to do with stocks or futures.
  6. If you fo with futures and use stop-loss orders, you technically have an option... and you don't pay premium?

    Why options then?

    Unless you really want to bet on volatility and that ind of stuff
  7. Uh, what?

    A stop is much different than an OTM option purchased against underlying as a hedge. The option can't slip, allows your position to recover after hitting the strike price, works 24/7 even if your broker or the exchange fails, and can be recognized by your broker as risk-limiting for portfolio margin purposes.

    For those benefits, you pay a price.
  8. rew


    Well, plenty of us do bet on volatility and that kind of stuff. If you want to make purely directional bets then use futures with stops. But if you want to make money on an asset that isn't going anywhere, it's hard to do that with anything but options.
  9. What's so special about options right now?

    they are mature instruments traded for years
    #10     Nov 17, 2010