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But the truth is all the awesome analyses with those programs still cannot actually predict the STOCK PRICE right? If I truly believe I have a better guess abou

But the truth is all the awesome analyses with those programs still cannot actually predict the STOCK PRICE right? If I truly believe I have a better guess about whether a stock is going to go up than the general market conensus (which is what I'm assuming is powering options pricing), then I do stand a chance of making money right? None of what you say seems to change anything about how a regular investor looks at an option as - it's just a magnifying glass on how much you can make or loose by betting on a stock. Either you get lucky or you are actually insightful in some stocks, that's the edge you have (if any) over the career traders who don't want to rely on this luck to make their money.

deleted 6y ago
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JumpCrisscross 6y ago
> If I truly believe I have a better guess about whether a stock is going to go up than the general market conensus (which is what I'm assuming is powering options pricing), then I do stand a chance of making money right? Yes [1]. But a one-way single-leg options bet is far less likely to make you money, in that case, than just going long or short the stock. [1] I am going to parse “truly believe” as have an information edge, i.e. you have seen something nobody else has acted on. Which happens surprisingly often to individual investors.
- scythe 6y ago
  > far less likely to make you money, in that case, than just going long or short the stock. Yes, but puts are a lot safer than shorts, because the downside is finite.
- ramraj07 6y ago
  Makes sense. My limited understanding is that with options I don't just have to guess that the stock will go up but also by how much and when. Agreed that many amateurs (like me) don't realize this well enough.
  - JumpCrisscross 6y ago
    > My limited understanding is that with options I don't just have to guess that the stock will go up but also by how much and when Also interest rates, the stock borrow rate, dividends, the shape of the volatility curve, et cetera.
bob33212 6y ago
It depends on the situation. For example, if you believe that the FDA approval for Moderna vaccine will be revoked next month, using an option could be a good way to make money on what would obviously be very bad for the stock next month. On the other hand if you just generally like company you could buy that stock directly and not worry about finding a 3rd party to take the other side of the bet. That 3rd party is trying to make a profit and even though you may be right and that 3rd party may be wrong you are still introducing a 3rd party into the investment.
frgtpsswrdlame 6y ago
>If I truly believe I have a better guess about whether a stock is going to go up than the general market consensus then I do stand a chance of making money right? Yes but options aren't just about direction, they're about timing too. The thing about holding a stock is you only have to be right about one thing but with options you have to be right about two.

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JumpCrisscross 6y ago

> If I truly believe I have a better guess about whether a stock is going to go up than the general market conensus (which is what I'm assuming is powering options pricing), then I do stand a chance of making money right? Yes [1]. But a one-way single-leg options bet is far less likely to make you money, in that case, than just going long or short the stock. [1] I am going to parse “truly believe” as have an information edge, i.e. you have seen something nobody else has acted on. Which happens surprisingly often to individual investors.

scythe 6y ago
> far less likely to make you money, in that case, than just going long or short the stock. Yes, but puts are a lot safer than shorts, because the downside is finite.
ramraj07 6y ago
Makes sense. My limited understanding is that with options I don't just have to guess that the stock will go up but also by how much and when. Agreed that many amateurs (like me) don't realize this well enough.
- JumpCrisscross 6y ago
  > My limited understanding is that with options I don't just have to guess that the stock will go up but also by how much and when Also interest rates, the stock borrow rate, dividends, the shape of the volatility curve, et cetera.

bob33212 6y ago

It depends on the situation. For example, if you believe that the FDA approval for Moderna vaccine will be revoked next month, using an option could be a good way to make money on what would obviously be very bad for the stock next month. On the other hand if you just generally like company you could buy that stock directly and not worry about finding a 3rd party to take the other side of the bet. That 3rd party is trying to make a profit and even though you may be right and that 3rd party may be wrong you are still introducing a 3rd party into the investment.

frgtpsswrdlame 6y ago

>If I truly believe I have a better guess about whether a stock is going to go up than the general market consensus then I do stand a chance of making money right? Yes but options aren't just about direction, they're about timing too. The thing about holding a stock is you only have to be right about one thing but with options you have to be right about two.