Options are not a good gamble (usually)

[bear]

Hard to resist the leverage of options in a bull market.....but never go naked....into expiration
month as the shit OFTENtimes hits the fan..especially in a thin market like precious metals.
Look at the poor gamblers who paid big $$ for MAY, in the money, calls and high premium calls on goldshares, coming into expiration (taking a gamble in a strong bull 2 weeks ago).........ABX 35s gone, 30s decimated
BGO 5s gone, CDE 5s gone GLG 40s and 35s gone
NEM 55s gone............100% loss to those call buyers as of today...whooda thunk it 2 weeks ago??
Well, sellers of those options will keep all those shares, points and premiums and start over..(nice biz)
Sooooooooooooo hope nobody here got hit..
Lets see who starts buying shares next week
(maybe hedge funds??) and maybe they'll be writing calls all the way up the next leg up

bear

 

[selkirk]

Bear options can be usefull in some cases. the average investor can many times benefit from writing (selling) calls on their stocks.
also selling some puts (well except lately...lol) and in some cases buying calls, and put (which for many indexes and stocks have been cheap the last six months.

would agree with you on buying options with a short time frame. also dangerous to do options on volatile stocks ie. gold, oil, base metals, ect. as the premiums are very rich.

options can be good to protect a portfolio (XIU on Montreal many of the Puts have tripled in value.) good insurance and cheap, as ussuall never have enough.

thanks
selkirk

 

[bear]

Selkirk,
Oh..absolutely.....options are great tools to hedge,
use as insurance, play volatility or simply to add time premiums by writing covered calls. All kinds of strategies such as the straddles, strangles can be very profitable........Its the use of naked calls (most frequently bought for their leverage in a strong market) that have a way of 1. eroding next to nothing or 2. getting slammed and expiring worthless before expiration.. PM markets seem more vulnerable because in smaller companies any orchestrated selling has a more profound effect on price as does buying. Just buying puts/calls for the leverage is a dangerous business where a HUGE% wind up losing their money..
Selkirk....as always you make very good points! gl

bear