2006-06-18 04:21:07 · 6 answers · asked by Anonymous in Business & Finance ➔ Investing
Options,whether calls or puts are a net zero sum game. This simply means that for every buyer there is a seller and vice versa. Estimates say that 70% of all options expire worthless. If that be the case (and it is) then 70% of all options value is credited to someones account. To answer the actual question, yes, you can make a lot of money selling both puts and calls but you will need to understand the principles behind the strategies and when to employ them.
Check out http://www.commoditytrader.ca they specialize in Options short selling
2006-06-19 11:06:04 · answer #1 · answered by Marty H 1 · 0⤊ 1⤋
When you sell a Call, you are selling the upside potential on a stock above an exercise price. In exchange for that, you receive a premium. If the stock does go up, you will loose money on this trade. If not, you get to keep the entire premium.
When you sell a Put, you are essentially selling insurance coverage against a stock going down below an exercise price. For this, you receive a premium. If the stock does go up, you will loose money on this trade. If not, you get to keep the entire premium.
There is money to be made by selling such options. But, it is not easy money. Option trading is a fast paced complex investment domain. Unless you understand the underlying calculations to valuing options, and you have gained some trading experience so you understand how such market moves, it is very unlikely you will make money. Option values following the famous Black Scholes formula are primarily driven by the volatility of the underlying stock. Regarding valuation, Volatility for options are as important as P/E ratios for stocks.
If you are looking for easy money and good night sleep, I encourage you to look else where.
2006-06-18 11:45:49 · answer #2 · answered by Gaetan 3 · 0⤊ 0⤋
Only if you know which way the stock is going! Play the market without money until you build confidence. Learn what certain times of the year the market moves the most , what news events drives the market, and how earning reports affects certain stock. Last read all you can about options trading. Good Luck!
2006-06-18 11:34:30 · answer #3 · answered by Retarded Dave 5 · 0⤊ 0⤋
If you are good at it. You can make a lot of money at anything if you are the best at it.
2006-06-18 11:25:28 · answer #4 · answered by sfavorite711 4 · 0⤊ 0⤋
If you do it right.
You can lose a lot of money too. It works both ways
2006-06-18 11:25:30 · answer #5 · answered by Anonymous · 0⤊ 0⤋
certainly, you can make big bucks out of it if you good at it, but you can lose greatly at the same token.
2006-06-18 11:42:30 · answer #6 · answered by Goldlion168 2 · 0⤊ 0⤋