There’s always a common slogan about buying naked options is that it’s purely gambling and nobody ever fetches regular income despite handling carefully with no emotions. There is enough hatred towards buying of naked options seen often. Is the whole work of buying naked options is responsible for the hatreds among the masses or the ignorance to the risk management and proper position sizing are responsible. In my opinion option buyers require huge amount of hard work and preparation than sellers. Most often 99% loose due to only lack of proper planning and ignorance to the other factors like trend, volatility and underlying news or events. One of the most common reason by virtue of option buyers often loose money is that they believe on hopes rather than current price behaviour.
One must always try to discover only low premium options having enough time value with proper trend set-up seen on the chart. Plus, never ever ignore predefined risk how much you ready to loose in each trade. Sometimes in buying, patience and intuition play wonderful role. Be patience only before enter into proper level rather than waiting in existing positions till your position erodes 70-80%.
If you can master, you can definitely earn consistent profit even in buying naked options which sellers often mention.
By this topic I never encourage to jump into option buying, only I express my own views.
Option buying works naked. The first thing to think while trading is how much will I loose among all things that can happen in market including fat finger errors. We retail have absolutely no control over the variables that move the market.
Option buyer can proudly I won’t loose more than my premium. If one has a good directional sense option buying works when win rate of the trade are skewed accordingly.
Option seller the risk is unlimited. Even if position is hedged a sizeable amount will be lost relative to the profits made when market does something out of the ordinary. Also one needs to be actively in the trade managing positions. Then need to worry about margins, penalities, captial saturation and so on.
The weirdest thing I have heard thus far in market is an option seller youtube influencer guy saying “you can make 1% every week and 4% every month passively with option selling”. Saying option buying doesn’t work falls in to a similar category.
It’s depends on mindset you formed over year about option. Some would say it as pure gambling and some don’t. It could be gambling if no technical analysis has been done and trading with no reason.Trade would be said as gambling if we throw money in table and hope it turns in our favour.
If you do trade with proper analysis and valid reason without expection on market then you are in 1 step ahead in getting 1% club.
It’s all depend on mather of choice , even fll do trading activies on long position of option , and these long position are not done for margin benefits.
Why would that be a problem with naked option buying ? Are you referring to deep OTM strike counters or deep ITM strikes with relatively low liquidity ?
This does not make sense at all to me. As long as edge exists, why should it be any less scalable for the same strike. Rather it might be slightly easier as impact cost would be lower vs multiple leg and adjustment stuff done by sellers.
Anyway, i don’t trade options so maybe i missed something…