Have seen lot of posts about ‘shorting’ market, buying dip and so on. Some of you might be tempted to try Options trading. Coming from an experienced trader who started with Black-Scholes model and built knowledge ( Statistical as well as real life), here is why you should NOT jump into Options trading now: 1. The Volatility is sky high. Options pricing includes IV (Implied Volatility) as one of the element. Normal markets has volatility in teens; now I seen volatility > 70%. You are buying options at steeper price because of high IV. 2. Your bet to buy call options can go terribly wrong. When markets go up, IVs tank. So even if you have delta gain, you will have horrible IV loss and theta loss ( time decay). 3. The bid ask spread is way wide than normal market. If you are unfamiliar with order entry system ( Market vs Limit), you will have loss from t=0, as soon as your order is executed. 4. We seen 2 circuit filters in 1 week. This not only halts trading for 15 mins, but also messes up Options pricing. Be aware of those gap ups or gap downs. 5. Individual Stock Options are generally more pricier than SPX. Also, volumes are low. Even if underlying asset price movement is in your favor, your order to close will just sit there. Keep that in mind. 6. If your bet goes right and your options become deep In The Money, you might have tough time finding a buyer when you try to close. You might end up closing for less than intrinsic value. Not trying to discourage but I do not want inexperienced person to lose their hard earned money in matter of minutes or hours.
So, is there any trip if market moves up some % points?
If you think the market will go up, you could try credit put spread. Look it up on google.
ELI5 triangle strategies (for options)
I have learned to never buy options during circuit breaker the hard way.
What’s your opinion on short puts
Short put is good strategy when markets tank by big amount (> 5 %) .. on that day, volatility spikes and you can short puts for some good fundamentals stock. You can download/ buy pricing data and back test this strategy. I wouldn’t personally short puts in this volatility and we don’t know where the bottom is
You can study all the ins and outs of a model, but in reality it doesn’t move the needle positively on the real exam. Welcome to the markets.
Some people want to sell SPY put options to pocket the premium. SMH.