Who Makes Money In Options

[NitroZ7]

I guess you can get a homer now or then but it sure seems like the probabilities are in favor of the seller's of options rather than the buyer of long calls. I know there are strategies where you can bet in a range but the Delta 30 calls are always 70/30 in favor of a seller. So the question I have is do the buyers of long calls make money in the long term? I guess they can make it be selling their call if the stock moves higher but it seems like you would need to quit your day job and just day trade.

[boneil]

Sellers make money in options. I think 90% or more of options expire worthless. Spreads help, but then you need to hold to expiration to see the full gain. The problem with buying calls is that you are always paying for time and as soon as you buy, you are losing that time/money every day you hold. If the stock goes down you lose, if it trades in a range, you lose, if it goes up slowly you don't really gain much. So many ways to lose money on options and very few ways to make money on buying an option. Which is why selling is the way to go.

[bluejay10]

I prefer to be a seller. I usually sell puts on positions I want to start a position in or add to a position. If I'm a call buyer it's usually short term for earning premium build.

[NoFishOnBoard]

I guess they can make it be selling their call if the stock moves higher but it seems like you would need to quit your day job and just day trade.

I used to be the trading supervisor on the trading desk of a large regional banks retail stock brokerage. At that time we executed trades for roughly 30,000 accounts. I've seen and executed every type of trade you can do, and I saw no one consistently make money buying options. I sat at a desk all day, every day with instantaneous access to all publicly available market data, and I consistently got my butt handed to me when I tried to trade options for my own account.

You're basically trying to time the market, and you are doing so with a shot clock ticking down and a gun pointed at your wallet. Trading options is routinely described as "paying your stupidity tax." I made good money on exactly one trade, and even then it was an absolute stroke of luck out of the blue that helped my position, and as much money as I made I probably only broke even counting the beatings I took on the other positions. It was the last trade I did.

[NitroZ7]

I used to be the trading supervisor on the trading desk of a large regional banks retail stock brokerage. At that time we executed trades for roughly 30,000 accounts. I've seen and executed every type of trade you can do, and I saw no one consistently make money buying options. I sat at a desk all day, every day with instantaneous access to all publicly available market data, and I consistently got my butt handed to me when I tried to trade options for my own account.

You're basically trying to time the market, and you are doing so with a shot clock ticking down and a gun pointed at your wallet. Trading options is routinely described as "paying your stupidity tax." I made good money on exactly one trade, and even then it was an absolute stroke of luck out of the blue that helped my position, and as much money as I made I probably only broke even counting the beatings I took on the other positions. It was the last trade I did.

That seems to be the consensus the more I watch and read. People with smaller accounts trying to hit home runs by buying options and selling naked calls and puts. It looks like the basic covered call and cash secured put seems like it is owning the casino with the house odds and playing against the customers who may win big now and then but lose over the long term. It seems like the capital intensive nature of selling covered calls and cash secured puts keeps a lot of traders in the low probability trades. Probably best to build up a portfolio gradually over time and then start selling calls and puts rather than trying to turn a small account into a big account overnight. That is pretty much what I got from the things I have read.

[Kletus]

I spoke with the regional manager of a large investment firm in the area. He stated that less than 5% of his brokers’ business comes from options but that options account for over 80% of client formal complaints.

Take that for what it’s worth..