Post by Deleted on Dec 27, 2017 15:49:27 GMT
Buying equity options is not investing, they're not even speculation, IMO they're gambling. Something like 70% of call options lose money for the BUYER. So, usually the seller makes money.
The safe way to be the seller is 'buy/write'. E G: You buy 1K shares of ARRY and then write 10 calls against it. Each call is 100 shares. You're selling the buyer, the right, but not the obligation, to buy 1000 shares of the stock until a certain date, for a certain price. You're essentially selling him time. Options are a wasting asset - each day that goes by they become worth less, unless they are moving in the direction the buyer wants.
There are many other option strategies, but unless you know what you're doing, you best stay away from them, as you can get hurt badly, if things go against you.
The buy/write can make you some good/safe money, especially if the stock is 'channeling' It's moving up and down in sort of recognizable range/fashion. If the option buyer 'exercises' his option, he pays you the strike price, so you got his premium, then sold him the stock. Now you can re-buy your position, and start all over. If he doesn't 'exercise', you just keep his premium he paid for the option.
This entire year is a prime example of losing on call options with OPK. A quick glance at the chart will tell you that the call writer (seller) was the boss man.
The option holder has to get all three things right:
Time
Direction
Extent of move/price
Don't ever forget that
C L
The safe way to be the seller is 'buy/write'. E G: You buy 1K shares of ARRY and then write 10 calls against it. Each call is 100 shares. You're selling the buyer, the right, but not the obligation, to buy 1000 shares of the stock until a certain date, for a certain price. You're essentially selling him time. Options are a wasting asset - each day that goes by they become worth less, unless they are moving in the direction the buyer wants.
There are many other option strategies, but unless you know what you're doing, you best stay away from them, as you can get hurt badly, if things go against you.
The buy/write can make you some good/safe money, especially if the stock is 'channeling' It's moving up and down in sort of recognizable range/fashion. If the option buyer 'exercises' his option, he pays you the strike price, so you got his premium, then sold him the stock. Now you can re-buy your position, and start all over. If he doesn't 'exercise', you just keep his premium he paid for the option.
This entire year is a prime example of losing on call options with OPK. A quick glance at the chart will tell you that the call writer (seller) was the boss man.
The option holder has to get all three things right:
Time
Direction
Extent of move/price
Don't ever forget that
C L