[Off-topic] Craig, I'm not sure what you mean by "option house". Do you mean somebody that calls you on the phone to tell you about this or that hot tip? Sure, if that's what you mean, it's a rip-off.
But if you're just talking about a broker that does what you tell them to do and executes your orders, how are they ripping you off? They are following your instructions, and most will get the best execution they can. (We can discuss whether or not the specialist is ripping you off, but that is another matter...)
(But, no, I'm not even convinced that the specialist is ripping you off. Sure, they set wide spreads on thinly-traded options, but, hey, that's because they are thinly-traded! They will usually do better then their posted bid/offer if you are reasonable. I have even made good money on these, in one case buying puts on a thinly-traded semiconductor equipment stock at a slightly inflated price, and then selling them back several days later for a several hundred percent profit. Although several days apart, my trades were sequential - that is, the previous trade in that option prior to my sell was my own buy! Now, do I think the specialist took the hit? Naw, he arbed it, I'm sure, and that is why he got paid well going both ways. If'n he weren't there, I couldn't have done the trade at all. They are providing a service, that's all - you want an option? They make and option for you.)
While I don't currently trade options (switched to Datek, which does not do options) I have previous traded options through Jack White. (They do their executions through DLJ.) I did mostly straight call and put buys, mostly in-the-money. I made money.
There are better strategies than just buying puts and calls, but they take a discipline that I don't have. For most of these strategies, you have to NOT look at the screen all day! They all depend on the dribbling-away of the premium, and watching that every day (and getting worried when the premium expands) will drive you nuts! I'm afraid that every covered call I've ever written, for example, I closed-out early at at a loss, and every darn one of them would have made a nice profit had I just let it go to expiration... (And more than just buying the stock - that is, my stock would never have been called.)
Anyway, if you want a good option broker, try R.E. Lafferty - I have heard good things about them. A tad expensive vs discount brokers, but they really provide full-service execution, know what they are doing, (you shouldn't have to explain the meaning of your orders, as long as you place the orders using standard terminology) will do contingent orders, have the best margin policies, etc. etc. etc. |
