Buying Options Vs. Selling Options - Which Is Better?



http://www.OptionSIZZLE.com Buying Options Vs. Selling Options -- Which Is Better? One of the first things many new options traders are taught is that more than 60% of all options expire worthless. This statistic, which never had hard research behind it, is usually meant to instill a sense of caution in new and versed traders. VISIT OptionSIZZLE.com FOR OUR 5 STEP FORMULA TO MORE PROFITABLE OPTION TRADES http://www.OptionSIZZLE.com SUBSCRIBE TO THE YOUTUBE CHANNEL! http://www.youtube.com/subscription_center?add_user=optionsizzle LET'S CONNECT! Facebook ► http://facebook.com/optionsizzle Twitter ► http://twitter.com/optionsizzle OptionSIZZLE ► http://www.optionsizzle.com Google+ ► http://gplus.to/optionsizzle Understanding this statistic can help you understand the importance of trade timing on entries and exits. The strategies of new traders tend to focus on long positions and buying options. They often fail to capture the profitable opportunities available using other strategies that involve being an option seller, or short an option, to collect premium. Being an option seller is somewhat different than shorting a stock. When shorting a stock, you expect shares to move lower and only profit if that happens. When selling an option. there are a number of ways to make a profit. You could sell a call against stock to collect premium, sell a put to collect premium with the intent to own shares of the underlying at a discount if prices do drop lower, or just sell a credit spread looking for prices to hold a level because you are not sure of direction. I came across a report created by Dr. John Summa which sheds some light on the subject of who actually wins more often in options. Is it the buyer or the seller of options? Despite the report and research being dated thirteen years, I still find the information very relevant and informative to option traders today. In his study, Dr. Summa finds that time and time again, regardless of market direction, the sellers of options have the advantage over the buyers. Think of it like this; if more than 60% of options expire worthless, and less than 40% of options expire with some value, then don't you think you would rather be on the sell side of the equation? It is important to note that in his study, Dr. Summa is referring to the ratio of options held to expiration that expire worthless. He does not include all the options contracts that are closed for a lower price than they were opened. To get the rest of the article go to http://www.OptionSIZZLE.com Also, let me know your thoughts on the subject and have you had success with selling options.

Comments

  1. Selling or writing options isn't as well known because it takes a higher trading level which brokers only assign if the trader has a bigger account.
  2. The options expire worthless because the winning trades were acted upon before they expired.
    Obviously, you are not going to let a winning options trade expire.
  3. if someone really had a sure way of making money in the markets, why would they make a course and why arnt they worth billions and billions? Also, let me give the presenter some presentation advice, Never ever just read what the power point says.
  4. Dragged on and on!!
  5. The presenter starts by talking about owning shares, selling calls against stock, comparing selling options to shorting stocks etc, only to then show charts on FUTURES options. Completely different things. All you need to know: The OCC publishes data on stock options, which this video started to talk about and in 2006, for example, 35% of options expired worthless. 48% were bought/sold to close and 17% were exercised. This video is meaningless. It's comparing apples and oranges.
  6. Option selling is not advantageous because the statistics say that over 70% of options expire worthless. A market maker isn't going to buy options from you unless they do so at a price that they know gives them the statistical advantage in terms of realized profits. In other words, the win percentage is NOT the final factor. The final factor is net profit vs. loss. If this doesn't make sense, consider that the amount won or lost on a trade is not generally constant. Therefore the win percentage alone doesn't suggest and advantage or disadvantage. This would be the equivalent of saying that because someone has a high field goal percentage then they must be a high scorer in basketball. Many of the people on the list of top scorers don't show up on field goal percentage lists. Dennis Rodman is on the list of top field goal percentages but obviously he didn't score a whole lot of points. Using win percentage to determine the ultimate profitability of a trading strategy would be like saying that the basketball team with the highest field goal percentage will win the game.
  7. ive had success, but also a few times that blew half my success out the window. the general rule is to sell 1std otm, but i dont see how you can safely double your money in a year without being out of the 1std move unlesss youre way over leveraged.


Additional Information:

Visibility: 28802

Duration: 11m 29s

Rating: 76