Understood, and you raise good points.
However (isn't there always a However -g), paying too much for an option, I mean when it's overpriced, can be the difference between making good money and making little money. Sure, if you're using only long options and get the direction right, you'll end up making money, but it's easy to pay 20% too much for an option and that eats terribly into your profit margin.
In the case of more complicated positions like straddles, which I like a lot, it can be the difference between making some money and making none.
Like you, I start from the point of view of market direction in the timeframe I want to trade, then I want to find an option position for an instrument (i.e., a stock, or QQQ, or whatever) that will work well for the market direction and timeframe I foresee, but, the last piece of the puzzle for me is passing on the trade if the options required for the position are overpriced.
I feel very strongly about this last point, but I certainly welcome the thoughts of those who have been at it longer than me.
Cheers |
