SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 227.35+0.3%Dec 19 9:30 AM EST
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: zTrader_77 who wrote (931)12/8/1997 12:29:00 AM
From: Bilow  Read Replies (1) of 164684
 
I think you understand the many risks and few benefits of options.
I treat it as a form of gambling.

But for the sake of those thinking about getting into options, I'll
list the disadvantages of being on the long side:
(1) Huge spreads (i.e. differences between bid and ask).
(2) Time premium decays. Like you say, under normal conditions,
if the stock price stays the same, the prices of options go down.
(3) If the implied volatility goes down (and it has gone down
recently) the options go down in price.
(4) The stock price could go against you.
(5) Even when everything goes for you, your gains will probably
be less than you (naievely) think. This is cause of the above
reasons plus the fact that as your option goes deeper into the
money (good for you), it commands a smaller time premium (bad
for you).
(6) They can be addicting, as any form of gambling, (or the stock
market in general).

Only a couple advantages:
(1) Your loss is limited to the amount of money you gambled.
(2) You have the advantage of leverage.
(3) While the commissions are higher than stock trades, they
are generally a relatively minor expense, given the leverage.
This is true only if you use a discount broker and gamble
reasonably large sums. Say $2000 each trade.

Best of luck, a much more important part of options than shorts,
but probably useful all through the stock market.

-- Carl
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News