回复：to *天马行空独来独往* my thinking about options

1. 90% of options expires worthlessly, so you should sell options generally, instead of buy.

writting option is an extremely serious business which can wipe out your asset out in one day. Generally, uncovered writting of put or call are highly discouraged by small individuals. Then you may ask who the hell writes option. It is usually the big funds who write options like hedge fund, mutual fund, brokers, MM etc. They have the gut to write options because they have their own ways to hedge the risks and they have the money power to write in case things go wrong. I do not recommend any small guys to write uncovered options.

"90% of options expires worthlessly". This may or may not true. I purchased options many many times, there is only one time where my option expires with nothing. That was due to my extreme greed. Why would you let your option expires worthless? Why can not you sell it if you things are against you? I simply do not understand. Investment number 2 rule is to cut loss.

2. some people say that I bought 9 options and lost about 9000 dollars, but the next option I bought made me 20,000 dollars, I am making money, that is right thinking, as long as you know what you are doing.

Think it backwards, if you sell options, made profit 9 out of ten, you can still lose money, because of the above scenario. So you really need to know what you are doing with options.

Can you win 9 out of 10 in options writting? I have serioud doubt on it. Each of your OTM option gains are pennies but one loss may cause you to hell.

3. Stock itself is already very volatile, option is more so, there is another big problem about option, namely big bid/ask spread, so trading option is much more stressful than stock, you have to have great confidence/self control to make option trading practical.

bid/ask is usually 0.05 or 0.10 in spread. one needs to pick up options with adequit volume and OI.

4, for myself, I favor selling options, but I usually do not sell calls, I want all the upside my stocks can bring me, so the only thing left I can do is sell puts. It is very simple theoretically, say I want to buy FMD at 35 and now FMD is trading at 38, you do not want to buy FMD at 38 and you also want to make some money from FMD because you think it is a good stock. what you can do is to sell a Sept 2007 35 put, what it means is that the buyer of puts can sell you fmd at 35 anytime before Sept 21 2007. Current market price for Sept 2007 35 is bid 1.95/ask 2.2 (symbol for this put is FMDUG). If you sold FMDUG for 2, and you are assigned stocks (namely buyer of your puts decide to sell you FMD at 35 per share), then your buying price for FMD would be 33.

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for the 2nd wavve of DNDN, DNDN was $24 before it crashes. If you write uncover put with strike price of $20, you will get killed and will probably never recover.


No individual should write uncover options. The power of option is for either protection or leverage.

所有跟帖： 

• 90% of options expire worthlessly is a statistic -longtermInvestor- ♂ (2001 bytes) () 06/04/2007 postreply 22:47:51

• 回复：90% of options expire worthlessly is a statistic -ForeverGreen- ♂ (401 bytes) () 06/04/2007 postreply 23:07:03

• thanks for clarifying the situation. -longtermInvestor- ♂ (193 bytes) () 06/04/2007 postreply 23:29:47