Options anyone?

[bunsen burner]

Options are not necessarily a high risk strategy - they can also be low risk.

If you concentrate mainly on buying rather than writing them then your downside is limited.

That's if you're buying options to reduce potential losses. Options can act as an insurance policy for underlying stocks.

But if you're trading options as a pure money making strategy then it's high risk.

 

[TheBloods]

But if you're trading options as a pure money making strategy then it's high risk.

Not if you're only buying options, not writing them, particularly if you stick to calls.

 

[bunsen burner]

Not if you're only buying options, not writing them, particularly if you stick to calls.

Then you have to pay the premium and if the price doesn't go down enough to cover your call then you get nothing.

 

[TheBloods]

Then you have to pay the premium and if the price doesn't go down enough to cover your call then you get nothing.

You want the price to go up.

But yes, you are out of pocket with the option, but that's all you lose - the premium. That's not a high risk as the downside is limited. You write an option though, and your downside can be large.

 

[bunsen burner]

You want the price to go up.

My mistake. Bloody easy to get mixed up with options at the best of times.

 

[TheBloods]

My mistake. Bloody easy to get mixed up with options at the best of times.

Takes a while of using them for them to be second nature.

I find the best way to learn and remember is to draw payoff diagrams and then you can visualise them when thinking of the options or trading strategies.

 

[Crow-mosone]

I have read this thread 4 or 5 times, I find it really disturbing. you guys can say what you want, be whoever you want, but this sort of talk can be quite dangerous and I just hope no one takes this at face value.

fwiw the NYSE does not trade equity options and has not done so for a number of years.

 

[PrideofSA]

I have read this thread 4 or 5 times, I find it really disturbing. you guys can say what you want, be whoever you want, but this sort of talk can be quite dangerous and I just hope no one takes this at face value.

fwiw the NYSE does not trade equity options and has not done so for a number of years.

What exactly do you find dangerous?

 

[medusala]

You want the price to go up.

But yes, you are out of pocket with the option, but that's all you lose - the premium. That's not a high risk as the downside is limited. You write an option though, and your downside can be large.

So losing 100% of your investment isnt risky?

 

[TheBloods]

So losing 100% of your investment isnt risky?

Not when the premium is a fraction of the amount you would have to outlay to actually buy the shares.