Bite your tongue, Wayne! I trade almost exclusively in options and can tell you that they can be very profitable while greatly reducing risk. But like most other areas of trading, and I think this is coming out in the messages of this thread, there is a tuition cost to be paid. NO way of getting around it. Losing money while trading initially is a natural progression. Continued success, Daryl
I heard someone who put it interestingly a few weeks ago. New traders usually focus on making money. They should be learning how to stop losing money. Once they get that down the making money part will come. Ever so true in options.
Back to the original question: I trade options: 1. It is the only strategy which can make money in a non-trending, choppy market for the neutral trader. 2. It allows me to fine tune my view of the market -- slow up, fast up, chop, slow down, fast down. If you are good at picking direction, then trade stocks. Otherwise, if you can only pick where the market will NOT go, then do options.
Options contracts is NOT for investing. They are for trading. Options contracts are insurance policies. Both side can win. Put option buyer buy the insurance policies to protect the long stock position. If the buyer consider it is a cost of business, the buyer wins even if the option expired worthless. Call option buyer buy the insurance policies to protect the short stock position. If the buyer consider it is a cost of business, the buyer wins even if the option expired worthless. Option sellers are the insurance companies who wrote the policies and collect premium. The sellers only loss if there is a claim (option go ITM). Everybody wins unless there is a claim on the policy!!! Win or loss in the option trade is not so clear because that depends on the intent of the option buyer. It can be win-win. However, there must be a buyer and a sell for every option contract. It is up to you, the trader, how you want to play, or trade. The option premium already figure in the risk and reward. Buyers and sellers has exactly the same risk and reward--in the long run, very long run. The risk and reward is adjusted continuously is indicated by the implied volatility as supply and demand changes. Option premiums go up and down because of the risk change. Would you consider the insurance premium paid for your auto insurance (a Put option) a decaying asset? You are happy that you are not carry the risk or ruin if you get into an accident. You win. The insurance company is happy to collect you premium because you are not likely to get into an accident. The insurance company win if you never make a claim. Both happy. Of course the insurance companies must have very good money management in case the Schit hits the Fan. The insurance companies hire professional traders to sell options!!!
=============== Chief; Lots do play in options, but much better to invest or trade derivatives, than play in them. Probibilities do favor one side much more ; Option coach made a good warning also about cheap options somewhat similiar to lottery. 3 Important differences between ''cheap ''options & lottery .[1]Lottery is a stupid tax on people who cant do math [2]Lottery is illegal in many places [3] Most Options have a delta [hedge ratio/probibility of winning by expery] much much better than lottery[lottery=stupid tax on people who cant do math]. And while probabilities do usually favor one side, mark this well; sometimes its the buyer favored .Mark Weinstein, Mark Cook did real well buying options, Mark Cook was helpful enough sharing his blow UP , selling options. Have bought /sold them, so reasons to do either or both. Marked both of those people named ''Mark''with plenty red/green ink in my library/Jack Schwager books Note i was not calling people who buy cheap options stupid; .30 cent call or put could be a wise buy, at right time/right place.Mark Cook really got cooking some with .50 cent area index or ETF options. Interesting he uses a time stop also.