Monday, February 9th, 2015

Buy Long Call and Long Put stock options for a living?

Is it possible to buy and sell long call / Long Put (or short Call / Put short) the stock options as a stable income? No margin? There are other strategies?

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9 Responses to “Buy Long Call and Long Put stock options for a living?”
  1. zyberianwarrior says:

    to do this you need to be right and you need a margin account. In this flakey market you have a good chance at losing your shirt. It’s not a wise stragety.

  2. joe s says:

    You will need a margin account.

    What you want to do is a straddle? It’s not always in the money though.

  3. zman492 says:

    I think if you only buy long option positions it would be very difficult (nearly impossible) to make a living. In theory it would be possible, but you would have to very good in picking the options you bought. You would not need a margin account if you only take long positions.

    I have seen people with large accounts make a living for two or three years writing (selling short) options, a strategy which does require a margin account. However, most of them have lost more than a years’ worth of profits in a short time when the market has moved against them. (The ones I have not seen experience such losses have not traded long enough to run into such a market move.)

    Every professional option trader I have seen making a living at it for an extended period of time has traded spreads. Most, if not all, of them also use stock positions to hedge options positions at times.

  4. Adam J says:

    You don’t need a margin account to buy calls or puts or to sell calls on stocks you already own. You will need clearance from your broker to trade options (they won’t let you buy calls or puts without at least some experience, generally.)

    In theory you could do it. Of course options are FAR riskier than stocks because they lack any intrinsic value–even if a stock does what you think it’s going to, if it does it after the expiration date for the options your correct market judgement is worthless. Any investment vehicle, no matter how much money it can make, should be viewed with great suspicion if it can lose you 100% of your money in a few weeks.

    You can also simultaniously buy calls and puts on the same stock as a hedge. While this does reduce your risk it also reduces the opportunities for profit. You’d almost certainly have to engage in some form of hedging for your own protection.

    In practice they’re probably best kept as a small part of your portfolio. Unless you are a very experienced investor who is very good at spotting turnarounds in stocks I’d use them extremely sparingly.

  5. efpol2000 says:

    Options are kind of financial insurance instruments thus buying them has low probability of profit.

    Most option option investment programs are based on short selling (writing options) but this strategy needs high knowledge of risk management.

  6. Frank Castle says:

    Yes. (If you have at least $250,00.00 USD)

  7. soflamiami says:

    Options can best used to help hedge or protect an equity position. For example, the covered call, protective put or collar are spread strategies that most anyone can use. However, a margin account is required. I do not recommend, unless you really know what you are doing, option strategies such as selling naked puts or uncovered call writing. Most discount brokers will not let you do it anyhow unless you have at least about $25K in cash/securities in your account. Even naked put writing is very dangerous because you potentially could be “assigned” virtually worthless stock and many speculative investors have been wiped out this way. As for uncovered call writing, you might as well just go bet in Las Vegas, in my opinion, to try this speculative and dangerous strategy. You will have to come up with stock potentially at a very high market price to deliver it at a much lower strike (ouch!). As for the collar, not everyone likes doing it but I think it can be quite profitable. You can write a covered call and buy a put, both out-of-the money. The risk is being assigned, but if you write out of the money, you are not going to lose anyhow. Besides, you still make some money and can keep playing. If you really don’t want to lose the upside, just buy the protective put. Sure, it will likely go worthless, but so what? Do you consider owning car insurance worthless if you don’t have an accident? Lastly, puts can be a good thing, and they are MUCH better than Selling Short, which in my opinion, is about as dubious as uncovered call or naked put writing.

  8. Thin Kaboudit says:

    If you have to ask this question, then the honest answer is that while technically it might be possible to do, YOU would not be able to do it. You’d just be gambling with your money. (Which is your right, if you so wish, but you might do better picking a horse!)

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