My friends have been doing options in the stock market, buying puts and calls based on where they think the stock will be headed. With that said, one of them have just broken even but made himself pretty busy managing the options and the other have earned some money from it.
I was thinking if I should go in and start doing options as well as the FOMO hits hard when they share about their experiences especially when the trade is profitable. But I am lazy and don’t want to be stressing about positions. I did covered calls during the bear market and overall did earn some. But the bull market is here now and I do not have much cash on hand to do cash secured puts so I am happy holding my spot positions.
My friends said it is a good time to get into options as the volatility is high and market seems to be going well but I know it’s not that easy.
Taken from ChatGPT: Options trading is a form of financial trading that involves buying and selling options, which are contracts that give the buyer the right (but not the obligation) to buy or sell an underlying asset (like stocks, commodities, or currencies) at a specified price on or before a certain date. Options are a type of derivative because their value is derived from the underlying asset.
Why 0DTE options are getting popular
One of my friend buys a 2 weeks to a month call/put but manages it daily and he says that once there is a certain profit, he will proceed to close it within the day. I didn’t really ask the details but it sounds tiring and so far he is profitable from what he shares.
Taken from Chat GPT: 0DTE options (Zero Days to Expiration options) are options contracts that expire on the same trading day they are purchased. These ultra-short-term options have gained significant popularity among traders in recent years due to their unique characteristics and potential for high returns.
I guess there is an adrenaline rush or excitement doing 0DTE options like you are earning money daily easily. I did not ask if he was earning money overall but I guess he is?
Using Covered Calls and Cash Secured Puts to earn some income?
I like using covered calls and cash secured puts as you will not lose money but in a way lose out in future gains if the stock soars up as covered call would mean that you would need to sell it once it hits the strike price and if the shares burst past the strike price, you miss out.
With cash secured puts, you miss out if the stock keeps going up and doesn’t come down to your strike price for you to get the shares at the lower price. In a way, it is a good way to earn some income although holding shares in the long term could turn out better in the case of covered calls. I have missed out in some gains for covered call so I only occasionally sell it. You don’t lose money but lose out future gains which is all right for me.
I do like the concept of cash secured puts but in that case, you would need to have some capital especially for shares that I would like to have in my portfolio.
Overall, I prefer holding spot positions and options are kinda secondary or optional in my case. What are you thoughts in using options as an income?
I have been trying for 1+ year. Its a good source of income and after you get the hang of it, the monitoring can decrease. The risk can drop alot by selling options for those with lower IV and Delta. Of course the earnings will be lower with less risk.
ReplyDeleteIn your post, you suggest that buying put and calls are as risky as selling covered calls. Buying and selling options have very different risk profiles, and very different payoffs. Before you buy or sell options, you must first understand option valuation and payoffs, and what risk you are taking on.
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