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Rambus Inc. Message Board

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  • dr.tjm42 dr.tjm42 Oct 31, 2011 10:39 PM Flag

    Simple mistake beginners make buying options

    Not at all true.

    If a put and a call are antipoles (exact opposites), then one group is going to win and one is going to lose. It's black and white.

    The only way both lose is if both groups buy naked puts and calls and nothing gets exercised. That won't happen half the time, let alone 95% of the time.

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    • It is not black and white. Prior to option expiration the big money players can run the price of the stock up and then back down. They will then buy the options back that they sold at greatly reduced prices. So both call and put option buyers can lose their money before expiration date.

      The run up in RMBS stock has given call option sellers the opportunity to sell call options. Next event will be to drive the stock price back down and buy those call options back at reduced prices. When the stock has put in a bottom they sell put options and then run the stock back up, making the put option worth less, which they buy to close their put position.

      I do know what I am talking about. I do it all the time.


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