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As usual, "it depends." Buying calls and puts is often gambling. However, you can also do rather conservative options trades (writing out-of-the-money calls on
by icedchai 6y ago
As usual, "it depends." Buying calls and puts is often gambling.
However, you can also do rather conservative options trades (writing out-of-the-money calls on stocks you own and want to sell anyway, for example) and bring in extra money.
- andrewzah 6y agoThis strategy is referred to as theta gang in /r/WSB nomenclature, but I would argue this is different because it's meta-gaming other people who are foolish enough to buy those wild out of the money options. This is my preferred strategy as well.
- fractionalhare 6y agoIt's an old strategy. Without an actual edge and significant (read: sophisticated and costly) risk management, that strategy will eventually get blown out by someone who is better at pricing long tail risk events than the seller. There's a reason market makers obsessively delta hedge. Would hate to have been selling put options on VIAC when Archegos shit the bed on $20B with >4x leverage. Good luck foreseeing that.
- nverno 6y agoWell just make sure you are selling credit spreads and the risk of such events is mitigated
- icedchai 6y agoyes, I have had this happen with a biotech stock. The puts can be very risky. I usually sell calls since it is easier to stomach psychologically when it goes wrong.... "I missed out on some gains. But I would've sold anyway..."