“I don’t invest in options.”
That’s from Saul (post #6 on this board).
Saul,
I am interested to hear your thoughts on options and why you don’t use them. I have just begun to dabble with options via put selling. I don’t have strong opinions on them yet.
Thank you,
Brandon
I am interested to hear your thoughts on options and why you don’t use them.
It’s parley ignorance on my part, but partly that I see options as a zero sum game, like futures. You are betting against someone who is on the other side of the option and there is one winner and one loser. And you are playing against real experts!!!
On the other hand if you buy stocks, and they go up, everyone wins (except the few people who may be short).
It’s a different animal.
Saul
Thanks for your thoughts. I am dabbling in put selling, which I don’t think is super-risky because I am selling puts on companies I wouldn’t mind owning more of. So even if the shares get put to me and don’t get to keep the premium, I won’t be too unhappy about it. On the other hand, if I get to keep the premiums, it seems like a little extra cash in my account without much risk. I’m starting slow and will see how I do this year to see if I continue.
-Brandon
You are betting against someone who is on the other side of the option and there is one winner and one loser.
…correct…
…however, one side wins 85% of the time, regardless of the stock…
…so I play on the “85% side”… 
It’s parley ignorance on my part, but partly that I see options as a zero sum game, like futures. You are betting against someone who is on the other side of the option and there is one winner and one loser. And you are playing against real experts!!!
This can be true but need not be true. There are many ways to use options. Many people use options to protect their downside in which case the buyer of a put option is purchasing insurance which they consider to be a benefit or a way to manage risk. The other side of that transaction is selling the insurance in exchange for a premium. Selling puts can also be used as a substitute for buying shares without actually putting up the cash for the purchase. Buy calls can be a way to speculate on the near term upward movement of a stock and the other side of that trade can be a way to earn some extra income.
Saul is generating some excellent returns and is probably happy just taking his 25-30% returns while being close to 100% invested most of the time. He can keep doing this and will never have a financial worry. While options can be dangerous if not used prudently, they are very different from futures.
I would add that you can easily lose all of your investment in options, which we already know right? right!
So, the biggest danger is when you have a time that you start to do really well with options. Then we usually start allocating more and more money to options. Then the disaster hits!
I have heard sooooo many stories from people inside the business of option traders making 100s of thousands and millions very quickly in options then losing their entire accounts. It happened to me as well after I start doing really well.
Be careful out there.
Thanks for the words of caution MusiCali. I will keep them in mind. I am limiting myself to put selling small amounts on companies I would not mind (and can afford) to buy more of. I plan to be conservative.
-Brandon