Buy Calls Always lose money?


I could see implied volatility decreases when the price rises. So, that could reduce, nullify or possibly give negative numbers on the profits when we BUY a CALL.

Is this a flaw in the system? I read people saying we got to buy at LOW IV and sell when it is high. I dont get this as the IV is however going to diminish when the underlying price rises?

In the contrary, Buying PUTS make money when the price falls. In that condition, IV will also increase giving additional income to the trade. How come this be an unbiased system(Stock Market?)?


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Actually your query is reasonable.It does behave like that.As you pointed out IV goes down when markets goes up and vice versa.Only missing point here is if you observe when markets goes up they go slowly but when they are falling they fall fast which adds to volatility.

Also when markets are going down conservative traders try to cover their portfolio by buying puts(portfolio insurance) along with speculators who solely speculate that markets will go further down and buy puts.

But when markets are going up conservative traders buy stocks instead calls and only speculators indulge in outright buying of calls.

Markets are always rational but its because of people who involved and their actions (psychology) makes it looks irrational sometimes(Bubble & Burst).

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Some expert has down voted for some reason. Guy, You are free to give 100 down votes but leave some comments too for doing so.

Hi Siva,
Can you suggest me a screener to filter stocks with lower IV percentile with under priced options? Can I do it in Zerodha PI itself?

Go through this link
On Pi it is not possible yet.