why don't most people do this

Discussion in 'Options' started by happy trading, Apr 17, 2021.

  1. elaborate
     
    #21     Apr 18, 2021
  2. tradrjoe

    tradrjoe

    For a buy and hold position, taxes are far worse if you are using options and rolling every few months.
     
    #22     Apr 18, 2021
  3. It's not a great idea because options are non-linear, which makes them an inefficient way to "lever up" on a stock (too many other factors).
     
    #23     Apr 20, 2021
  4. ironchef

    ironchef

    ???

    Convexity is what make options so attractive.

    Those of us who make a living trading single leg is essentially doing this. We replaced margin interest with options premium, avoid margin call but take the time decay risk. We do it when options is cheaper than margin.

    As always, the devil is in the details.
     
    #24     Apr 20, 2021
    shuraver and qlai like this.
  5. you're doing relative value which is not the same as just:
    and my comment was more of a response as to why one wouldn't just assume that buying deep itm calls is a better payoff vs. buying the stock outright. The convexity in options is not the same as leveraging a position.
     
    Last edited: Apr 21, 2021
    #25     Apr 21, 2021
    ironchef likes this.
  6. ironchef

    ironchef

    Both very good points and in most cases relative values are very close or someone will arbitrage it away.

    To make money in this business I need to be more correct than the market.
     
    #26     Apr 21, 2021
    longandshort likes this.