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Strategies & Market Trends : Options -- Ignore unavailable to you. Want to Upgrade?

To: edamo who wrote (5682)	3/28/2000 3:44:00 PM
From: Atin	Read Replies (3) \| Respond to of 8096

C'mon you guys -- I think all of you agree that people make money when they know what they're doing. Some of you know selling, some of you know buying. Hopefully this thread is about using your knowledge to explain what it means to trade your way. If it makes you money, the rest of us want to know how you do it. It isn't about who is right, it is about making money . . . taxman is taking an extreme position regarding selling, just as you are doing it regarding buying . . . both of you make money, so I would like to learn what both of you do and make double what you do ;-) The best way to teach is to show ... tell us about your trades (you don't have to give how many you bought sold), tell us why you chose that series, that stock etc. People like me who have no experience at all picking one option from another would love to hear real live examples of things people do. -Atin

To: edamo who wrote (5682)	3/28/2000 4:22:00 PM
From: KFE	Read Replies (4) \| Respond to of 8096

I haven't posted here in some time (too active for me to monitor closely) but I would like to dispel some myths about options that I have seen posted. 90% of options expire worthless- not true Professional option traders only sell options- not true- actually most market makers/traders will be gamma positive the majority of times which implies a long position. Most make money by trading implied volatility when they cannot trade the bid/asked spread. This means that they are buying underpriced options and selling overpriced ones. Covered calls vs. naked puts- both are the same position. They will have the same dollar amount risk/reward but the naked put will give you a higher rate of return and can be boosted if written against T-Bills in the account. The only reason I can see why someone would write covered calls is that they can't do naked puts because of an IRA account, no naked approval, or are required to hold stock in the account such as institutions, or have existing long term stock that cannot be sold. If starting an account from scratch and you want to maximize your return selling naked puts will yield a superior return to covered calls. This is pure mathematics and not my opinion. Taxman's strategy- I have traded options since they began trading and I can't recall any professional traders who just bought options but that doesn't mean that it is not possible to make money doing it. You just have to be very good with your timing since you lose if the underlying goes slightly in your desired direction or against you. Similar to going to the track... you have to beat the vig... some can do it but not very many. I believe that Taxman only uses a small percentage of his portfolio to buy options. A wise strategy. Nice to see the knowledge level of options increasing on the thread but there are many ways to trade options and all of them do not fit everyone's style of trading. Regards, Ken