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> Options have the same risk as the underlying. Not really. Option pricing includes volatility (beta) and time-decay (theta) in addition to basic price sensiti

> Options have the same risk as the underlying. Not really. Option pricing includes volatility (beta) and time-decay (theta) in addition to basic price sensitivity (delta). In plain english, an option has a premium not just based on how far from the money (from current price) the strike is but also how much underlying is moving AND how far away option expiry is. Vol moves are not to be underestimated - if you look at option prices within a buck or two of Intel when they announced earnings, you'll see how implied vol changed. Lastly, I believe options are too complex for retail, non-active investor to grasp not because of needing to buy 4 legs to form an iron condor or something, but from fact that there are inherently more built-in risks that are very hard to understand, vs simple "company does good, it goes up, company does bad, it goes down" proposition of a stock. Lastly, i do agree with you that options present a very good set of tools, but like with any power-tool, you should know what you're doing before pressing that "on" button :)

encoderer 12y ago
You're missing an important fine point here: I am not advocating buying options. These strategies are selling options. So implied volatility and theta decay are your very best friends. This "options are too complex" language is just silly. Retail investing doesn't work as it's been taught! It underperforms the market and professional investors, and it doesn't have to. You don't have to run complex positions, selling a vertical spread is every bit as easy as buying stock (one transaction to open the position, one to close it, and sometimes you don't need to close it.) Anybody who wants to tell me options are risky has to explain this: Suppose you want to capture upside in, say, Amazon. Why is it riskier to sell a put spread or buy a call spread, in either case risking just a few hundred dollars, than it is to buy shares when just 25 will cost you $7500 or more? The fact that you mistook the value of theta decay and IV in my proposed scenario of selling a covered call makes me think you just don't understand some of these things. And that's not your fault, it's a huge fail IMO that the retail investor has had to learn the finer points of front load vs back load on some overpriced mutual fund but has been taught that options are scary. Again, I do not advocate for taking long option positions and I definitely think you should check out TastyTrade.com to learn a bit more about the philosophy.

encoderer 12y ago

You're missing an important fine point here: I am not advocating buying options. These strategies are selling options. So implied volatility and theta decay are your very best friends. This "options are too complex" language is just silly. Retail investing doesn't work as it's been taught! It underperforms the market and professional investors, and it doesn't have to. You don't have to run complex positions, selling a vertical spread is every bit as easy as buying stock (one transaction to open the position, one to close it, and sometimes you don't need to close it.) Anybody who wants to tell me options are risky has to explain this: Suppose you want to capture upside in, say, Amazon. Why is it riskier to sell a put spread or buy a call spread, in either case risking just a few hundred dollars, than it is to buy shares when just 25 will cost you $7500 or more? The fact that you mistook the value of theta decay and IV in my proposed scenario of selling a covered call makes me think you just don't understand some of these things. And that's not your fault, it's a huge fail IMO that the retail investor has had to learn the finer points of front load vs back load on some overpriced mutual fund but has been taught that options are scary. Again, I do not advocate for taking long option positions and I definitely think you should check out TastyTrade.com to learn a bit more about the philosophy.