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I know a pro oil-gas trader who write call option for his hedge fund, while his fund made a killing for the pass few years, thanks to big valitility in oil and gas for pass few years.
He was doing fine when price of crude oil fractuate in the $18 range. Collected a lot of premium at that time.
But he end up getting fired, he loss a lot of money for the fund on those naked call option, because from what I uderstand on writing call, market have to be calm. not volatility to collect money.
Another thing with stock options, the spread will put you in a big disadvantage. On stock option each step is $5 on stock that is over $30. (this is out of memory, could be other then $30). while if you buy individual stock it is only 1 cent.
I done a calculation a few years back on writing option. You can be 80% to 90% correct and still not making money. In other word, you can be collect those preminum for 8 to 9 time out of 10, but that 1 or 2 time will wipe out you profit.
After that, I stay away from options, there are just too many thing against you on options. Trading stock or futures is easier.
weiwei |
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Interesting comments wei wei.
I've been talking to my options friend and he's making money doing his writing but he hasn't been doing it long. He get's like 9 winning positions in a row, but like you said, if you take a HUGE hit, it could wipe out gains significantly. So the key is, can they make enough money fast enough so a big hit doesn't take out 30% of their account in a single trade.