Such as its use as an insurance against catastrophic losses via going long puts and taking advantage of covered calls to generate extra income during sideways trading markets which could be used to dollar cost average your portfolio etc.. People pay insurance on automobiles, a depreciating assets but never insure their portfolios.
The market only goes up. Cardboard boxes and apples are a better hedge. If we don't go into a depression you can always eat the extra apples. Use the cardboard boxes to store stuff.
I agree, I think Rebecca Darst (from Interactive Brokers?) was the only person I've seen who even talked about options.
pete najarian mentions them on almost every one of his positions, CBOE or BOT misnamed them ,misnamed callls and puts also,they should have called them stock futures, since they werre basically copying grain futures, and the public fears what it doesnt understand, very few viewers understand options, and they(television) are in it for the masses
The "somewhat" great Jim Cramer made most of his fortune with options, yet his own show does not promote them...at all. So the big question is : WHY NOT ? And the obvious answer is: It's beyond the grasp of the "masses" of which Jim wants to influence.
Honest concern there're too speculative for his audience? You really want mom and pop using hard earned money to buy calls and puts when 90% expire worthless?
No one understands them. They have a hard enough time tying their shoes. Somehow they managed to open an account and trade. I mean....forbid the fact they attempt options.
The media caters to the public, who is unsophisticated and easily intimidated by more 'complex' investment strategies. In a true laissez fair bear market, index shorts wouldn't do well because most writers would go bankrupt before the investor could collect. That's what happened with CDS - huge banks sold trillions more in debt/tranche insurance than their combined net worth. The Government had to step in and bail them out. Thats the scam about derivatives trading. Short derivatives only "work" (ie, the buyer gets paid), when a solitary or localized event occurs. When the bottom drops out of the entire economy, the Government pays or no one does. There's more than 500 Trillion in theoretical, global derivative exposure. And most of that is short exposure. Meaning, if the global economy tanked tomorrow, there isn't enough chedder in the world to pay off short option holders.....