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  • I recently was approved by Schwab for naked options as well as Portfolio Margin. Not saying I'm going to be going crazy selling naked puts or calls, but has anyone here had any experience doing this, even only sporadically?

    Portfolio Margin is a great perk, but of course there are pitfalls to watch out for.

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    • The problem with options is they all have a negative expected return after costs. So in that sense, none of them are a real investment, they're just different ways to gamble or at best speculate on the market. You should always ask yourself who is on the other side of the bet and what do they know that you don't.

      My very first investment as a kid was an option that my dad's friend recommended to the two of us. I lost the whole $500, money I really didn't have to lose (it was most of my Alaska Permanent Fund Dividend as I recall, basically most of a year's income).

      Good luck to those trying to make money this way. Please limit how much of your portfolio you use to do so.
      Helping those who wear the white coat get a fair shake on Wall Street since 2011

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      • Originally posted by xraygoggles View Post
        I recently was approved by Schwab for naked options as well as Portfolio Margin. Not saying I'm going to be going crazy selling naked puts or calls, but has anyone here had any experience doing this, even only sporadically?

        Portfolio Margin is a great perk, but of course there are pitfalls to watch out for.
        Dont do it. You'll most likely win big for a while, and then get rekt. Just think of people that sold options on GME or TSLA in the past with what appeared like "juicy premium", it wasnt.

        The only reason to use portfolio margin is to have some ability to leg into things and have the margin be recognized as a spread vs. to single legs of an option. Can be nice.

        I looked into it before and it really wasnt different.

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        • Has everyone here read the Market Timers thread? https://www.bogleheads.org/forum/vie...hp?f=10&t=5934

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          • Nysoz
            Brains428
            Jack_Sparrow

            Great info and thanks for sharing your advice and experiences. I am very far removed from knowing what an Iron Condor is but let's see if I ever get there!

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            • Originally posted by Lordosis View Post
              Has everyone here read the Market Timers thread? https://www.bogleheads.org/forum/vie...hp?f=10&t=5934
              Truly a cautionary tale! Market Timer is certainly more knowledgeable than I am. Not sure if it was bad strategy or bad luck but in the end he could’ve had more by doing less.

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              • Originally posted by DocFi View Post

                Truly a cautionary tale! Market Timer is certainly more knowledgeable than I am. Not sure if it was bad strategy or bad luck but in the end he could’ve had more by doing less.
                His logic was sound but his timing was horrendous. Which is rather ironic.

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                • Originally posted by Lordosis View Post

                  His logic was sound but his timing was horrendous. Which is rather ironic.
                  As they say, one should not confuse strategy with outcomes!

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                  • Originally posted by Zaphod View Post

                    Dont do it. You'll most likely win big for a while, and then get rekt. Just think of people that sold options on GME or TSLA in the past with what appeared like "juicy premium", it wasnt.

                    The only reason to use portfolio margin is to have some ability to leg into things and have the margin be recognized as a spread vs. to single legs of an option. Can be nice.

                    I looked into it before and it really wasnt different.
                    Yea of course I'm not planning on anything crazy, it's just another tool in the belt, for future use, if desired.

                    Agree re portfolio margin - it's a double edged sword for sure. Juicy leverage is good and bad.

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                    • Originally posted by The White Coat Investor View Post
                      The problem with options is they all have a negative expected return after costs. So in that sense, none of them are a real investment, they're just different ways to gamble or at best speculate on the market. You should always ask yourself who is on the other side of the bet and what do they know that you don't.

                      My very first investment as a kid was an option that my dad's friend recommended to the two of us. I lost the whole $500, money I really didn't have to lose (it was most of my Alaska Permanent Fund Dividend as I recall, basically most of a year's income).

                      Good luck to those trying to make money this way. Please limit how much of your portfolio you use to do so.
                      this is why in certain circumstances selling puts and selling covered calls makes sense. Obviously I have been very lucky in my strategy so far. I bought naked calls on Tesla for practically free in 2019 and then sold almost $1M worth of covered calls in Jan 2021. Now I’m selling puts on dip for crazy premiums and buying atm calls from proceeds of my covered calls. If you have a good understanding of a stock I don’t think there is a more profitable way to make money but it is very risky. Once you are working with money you made though it is Monopoly money that you can gamble without emotions.

                      Comment


                      • Originally posted by BCBiker View Post

                        Once you are working with money you made though it is Monopoly money that you can gamble without emotions.
                        Maybe you can. Others can't. And there are even those on the other end of the spectrum who can gamble without emotions even with money they've borrowed. It's a skill.

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                        • Originally posted by BCBiker View Post
                          If you have a good understanding of a stock I don’t think there is a more profitable way to make money but it is very risky.
                          I honestly don’t think anyone has a good understanding of TSLA.

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                          • Elon saying something about beta FSD on the twit machine over the weekend. Probably belongs in the Tesla thread- the best and worst thing for that company would be for him to leave it/be called away.

                            Anyways- markets like these make the options a little more work. I'm wondering how many people will be using their stimmy money to go towards debt vs YOLO options on TSLA, APPL, or any of the many SPACs. Friday is quadruple witching, so some stocks will see some movement. Establishing a position 5 days in, you'd basically be flipping a coin.

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                            • Originally posted by CordMcNally View Post

                              I honestly don’t think anyone has a good understanding of TSLA.
                              I don’t think anyone can predict anything about the market in general. TSLA more so than a lot of others, but there’s even crazier mania stuff like nkla or cciv or gme. High volatility means good premium selling options though

                              Comment


                              • Originally posted by Nysoz View Post

                                I don’t think anyone can predict anything about the market in general. TSLA more so than a lot of others, but there’s even crazier mania stuff like nkla or cciv or gme. High volatility means good premium selling options though
                                isn't it more like high premiums but also higher risk? like IV being inherently high isn't good or bad right, the option should be priced relative to its risk? I guess you could find ones where you think the IV is higher than it should be.

                                The word good to me seems to imply you are at the advantage, rather than just the word high, where I would say the stakes have been raised.

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