<<why is the genereal sentiment that 85% of options players loose money?????? >>
some of it has to do with the nature of options. they are often used as insurance instead of stop losses. If you've had a run in your stock and you don't want to sell it you would buy put options to protect your position. if the stock continues to run obviously you would lose 100% on the option but have lost no net income.
Similarly, my favorite trade is the straddle. That is when you buy equal amounts of puts and calls. They are very cheap on the QQQQs right now. you can pick up a June Q straddle at $37 for about $3 right now. That means that if the Qs go below $34 or above $40 you will make a net profit...but only through one side of the straddle. The other side will lose %100 and 50% of your 'positions' will expire worthless. Because of the dynamic nature of options though you can still make money in a situation like that
<<Similarly, my favorite trade is the straddle>>
Straddles are the most safest way to play options. On Goog they can be really expensive though imo keeping your breakeven points unreachable esp. in mnths like these where stock really stays in the mud.
How long do you normally hold onto a straddle position on order to make a profit? I am trying to look into a safer way of investing my money in a longer run. I day trade options on GOOG right now, usually jumping in when it is trending up over a period of time to make a quick 500-1000 here and there, and the strategy works, but there has to be an easier way. Any insight is good!
<<<You're forgetting that Trader B has giant commissions costs that he has to cover. >>>
Good point. Commissions add up fast for day traders and options players alike. Just as margin interest can for long-term investors. They've eaten up as much as 10% of my profits this year. That could easily be the difference between making money and losing money over the long haul . . . but so far it had not been terrible.
<<<Saying the odds that B loses money are "miniscule" goes against what the Senate found re day trading: 90% lose.>>>
The Senate didn't investigate the specific case of buying calls for a stock that doubled in value. Let's not compare apples to oranges. Do you have a link to the 90% finding? I'm genuinely interested in seeing it. I don't doubt it, either, for the reasons I gave in my initial post. Most importantly, few day traders in the 90s (and probably still few) understand the concept of managing the risk of ruin by risking only a small fraction of their total bankroll on high-risk investments.
gmad, I could tell that English was your second language from one or two posts . . . but it is excellent nonetheless.
My simple case was meant to describe a situation in which both traders estimate the direction of the stock correctly. Both could also be wrong, and the options trader will probably come out behind. But my point is only that if you think traders can't EVER know which direction a stock is headed in the long term, then NO ONE can make money reliably.
You're forgetting that Trader B has giant commissions costs that he has to cover. Saying the odds that B loses money are "miniscule" goes against what the Senate found re day trading: 90% lose.
<<<The odds that Trader B loses money are miniscule. The odds that Trader B outperforms Trader A are very, very good.>>>
I use candlesticks extensively and find them to usually be a great indicator of relative maxima and minima and a decent indicator of continuation and exhaustion. Am I always right? Of course not. Have had sufficient succes to stay at it. Not ready to quit day job though.
What happen that their "beliefs" don't materilize and the stock goes down?
<< Take the simple case. Trader A believes that GOOG will go up slowly and steadily over time, with periodic dips, buys Google at 100 and sells at 200 three months later.
Trader B buys calls each morning and sells them each afternoon for those three months. How do you think Trader B ends up?
The odds that Trader B loses money are miniscule. The odds that Trader B outperforms Trader A are very, very good. >>