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I couldn't help but notice that by that logic auto insurance is a bad idea. Not only you have to be right that you get into an accident. But also you have to ge
by hrez 8y ago
I couldn't help but notice that by that logic auto insurance is a bad idea. Not only you have to be right that you get into an accident. But also you have to get into that accident before contract expires.
Would he pay premium for the options? - Sure. But that buys something. Limiting the loss vs shorting for example. Besides shorting isn't exactly free either.
- jameslk 8y agoAuto insurance is risk management, not investing. Auto insurance doesn't expire. OP can keep being wrong for years, buying options over and over until they're no longer liquid. I guess you can do that with any stock. The market already prices that in (implied volatility as I mentioned). The point is, you don't use options for investment decisions where you don't know the timing of when you'll be right, unless you're hedging another investment.
- hrez 8y ago>Auto insurance doesn't expire. Every single auto insurance in US I had is a 6 or 12 month contract which expires at the end. The expiration time/date is very specific to the minute. You usually get a new contract after that which you can choose to pay premium for or loose coverage otherwise.
- jameslk 8y agoYes, my bad, you are correct on that. I meant more that options don't renew. I came to edit it after I thought that through but too late I suppose.