Your explanation makes sense. For YOUR trading/option selling. I do option selling also. However the problem is you are encouraging OP to sell options when he is clearly looking for comparison of strategies that are very bullish on the market and holds for the intermediate term like 45 days call and synthetic stock positions. He makes absolutely no mention of wanting to hedge any sideways movement.
You are thinking option selling is one size fits all, it is not. It obviously works for you but to encourage OP to do it when he is looking for outright long is dangerous if he does not understand the dangers of selling is bad advice no matter how you look at it.
Having only 1% or 2% chance of 3 stdev move is only if you have no system for picking direction. If OP is wanting to long call/synthetic he most likely has a system that gives him the edge in directional trading.
Selling closer to the money does not reduce edge if you manage it properly. Look at the tastytrade video on short strangles (otm) vs short straddles (atm). Short straddles made more in the end.
There does NOT need to be any research in having unlimited upside. Have a read of Market Wizards, there is not one trader/investor that primarily sells options. They are all stocks/futures/currencies/long options. The only LARGE option selling fund that is successful that I know if is Karen's. I can easily find hundreds of other funds that have "unlimited upside".
I love option selling but what you have stated is pretty one sided.
Which is why I took the time to use "I" and "me" quite a lot.
OTM can be anywhere....in their study they are selling straddles and strangles....but all OTM or ATM....how far out is up to the user. And both are non-directional plays which allow you to be profitable even when your assumption about direction is wrong. I believe that only serves to illustrate my point.
I've read "Market Wizards" thanks.
If you assume I'm encouraging anyone to do anything then you assume too much. I could not give a rat how anyone trades or how they arrive at their assumptions with whatever holy grail they have. But I think there is value in exchanging opinions or insights even when not everyone can see their value....because there will be some who will.
But if you want to trade directionally then just pick your deltas and trade them....but there will always be a pricing advantage to the sellers of options...that's just the way they are priced. And unlimited upside is not unlimited as people think.
Thanks for your time though.
Last edited by ACstudio; November 12th, 2014 at 07:37 PM.
Fair enough, I liked how you describe options selling but as a response to someone looking for outright long I thought was out of place.
There is no pricing advantage to sellers over buyers 99% of time that is attainable by retail traders. Arbitrageurs/algorithmic trading/bots make sure of that. There is potential advantage when the value decays more than it gains from other factors.
FYI on Tastytrade while the ideas they present are good, keep in mind the 2 presenters are either unprofitable or very low profit traders. They were impressed at Karen's return this year of 11% and made remarks wishing how they could make 11%. Their trading abilities seem to differ a lot to the backtests they produce.