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Trading Option Trading

Discussion in 'Shares' started by Chris C, 15th Sep, 2012.

  1. Chris C

    Chris C Well-Known Member

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    I saw this video recently and I was just wondering if anyone who has experience selling options could comment on how realistic these sorts of returns are:

    Jamie McIntyre Interviews John Thompson about Trading on Vimeo

    I should point out that I have listened to some of Jamie's stuff before and whilst well intentioned I think he is ignorant of a lot of things when it comes to the economics of investments I have no doubt he is over hyping this strategy as well. Though I was interested nonetheless.

    As a follow up question I was just wondering how much capital would one realistically need to make a full time living selling options?
     
  2. Tropo

    Tropo Well-Known Member

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    Don't you like McIntire's hat??
     
  3. Chris C

    Chris C Well-Known Member

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    I think you are talking about John Thompson the guy he's interviewing...

    :D

    Any comments on the money to be made in writing options? as opposed to option writer's fashion sense...

    My thinking was the only way a conservative option writing could yield 2%+/month would be if there were regularly large and obvious market inefficiencies. Is this the case?
     
    Last edited by a moderator: 16th Sep, 2012
  4. Tropo

    Tropo Well-Known Member

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    Oh well...jet leg is still killing me softly.:mad:

    Return of 10%-20% (or more) per year is possible. But do not forget that while some traders are making money, other traders are making a loss.
    Writing options has to be learned and practice like any skill, but if you cannot make it as a share trader, what makes you think that you can make it trading options?
    Personally I do not trade options.
     
  5. Chris C

    Chris C Well-Known Member

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    I'm not a share trader.

    Nor would I want to be an options trader.

    What I was considering was writing/selling options to the market...

    I figure that's more about selling "insurance" to market participants that want to protect themselves on either the upside or downside of their portfolio positions. And obviously as the salesmen you get to set the terms or the deal isn't done...

    So I then figured it would just be working out how to calculate a fair risk/reward ratio by which to set the premiums that is also palatable to the market.

    ie, if I like WOW as a long term investment I don't see the major downside to promising someone to buy their WOW shares off them (selling a put) if the price falls by say 5% if they are willing to pay a premium.

    By my logic this strategy perfectly suits a value investor as it allows you to earn premiums whilst waiting for a better buy price...

    Then on the other end I figured selling covered calls at strike prices that offer a reasonable ROI for the capital invested, whilst earning a premium isn't a bad thing either.

    Thoughts?
     
  6. Tropo

    Tropo Well-Known Member

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    There is nothing wrong with writing options.
    There are some traders who do just that. Technically speaking it's a job for traders/active investors - not for insurance or sales people like you think.
    If you are willing to do what you said, you should learn how to do it.
    Try to attend a few courses, read some books etc...
    After all - have fun.
     
  7. Chris C

    Chris C Well-Known Member

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    No I didn't mean it was something that would be good to do if you were an insurance salemen, I meant the principle of selling options is like being someone who is willing to sell insurance for other trader/investor's portfolio risks, ie I would take on their risks in exchange for upfront premiums.

    I tried looking into some options courses but most of them seem quite expensive, a little dodgy and get bad reviews.

    I'm in the process of order a few books though...

    If I give it a go and make money I'm sure it will be fun to have learned a new skill without losing my shirt.

    :D
     
  8. Tropo

    Tropo Well-Known Member

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    "I'm in the process of order a few books though.."

    Try "The Secret of Writing Options" - An Autralian Guide to Trading Options for Profit by Louise Bedford.
    Happy Writing ;)
     
  9. Chris C

    Chris C Well-Known Member

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    Thanks for the recommendation.
     
  10. Tropo

    Tropo Well-Known Member

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    Pleasure...