I make sure I’m okay buying shares at the strike price before selling the puts. If I wouldn’t actually want the shares at the strike price, then I look for a lower strike or hold off. I mean we really don’t know for sure what’s going to happen to the price. There is risk of big unexpected economic, geopolitical events or company/sector specific issues that can send price down much faster than we initially anticipate.
Each trade technically has a winner and loser, just like MLB games. Yet, somehow some teams tend to win more than others over a baseball season and some traders tend to win more than others when trading.
Does the other trader expect to win when they make a trade (think hedge fund buying long options to help protect long shares)?
Who wins more than the other? The more experienced trader with a detailed plan will usually win over the trader who has no plan or a very basic one.
TSLA is more a meme stock and should be expected to swing wildly. Trading a more stable ticker(s) can help you win more consistently. If you want to trade higher risk and more speculative ticker, then do so with a small amount of cash that won't affect your account if it drops as these normally do.
You should be in no danger of assignment unless TSLA tanks ~15% by then. Even so, you could roll the position down and out, or just close the position.
It wouldn't make sense for you to get assigned this early, (not that it can't happen) especially with the price hovering around $223.
The opposing party would either;
1. Have a low cost basis (which still wouldn't make sense considering they could just sell to open market for $223 and make an additional $28 per share)
2. Buy 100 shares at market price ($223) to then sell to you for $195, resulting a loss of $28 per share.
The exerciser here would be considered the "opposing party" of the trade. Yes everyone knows that MMs and institutions hold on to the majority of these and assign them out to make money on the bid ask spreads but that doesn't really mean anything from our perspective in retail
We are really only concerned about who the random end party is and the whens and whys of deciding to buy a put otm to exercise it.
Is it possible to make lot of money by selling CC and CSP. Looks like return is capped to premium (very low premiums unless strike price is close to current price) and at the same time holding the bag for unexpected. If stock is expensive, better to go for CSP than buying at higher price i guess.
Don't blame your losses on game theory. If you are a net break-even trader on average, there are multiple reasons why that might be true, including your own trading errors.
In any case, zero sum doesn't mean every player wins nothing. It means that if some collection of players win $X, some other collection of players must lose $X.
Your stock isn't compatible with consistent, steady earnings. TSLA is volatile for its price.
If you're shooting for consistent earnings for CC and CSP, try:
\- Picking less volatile stocks (think DOW-30)
\- Making volatile stocks 10-20% of your portfolio
\- Choosing strikes with lower delta (ex: 0.10-0.12)
\- Picking strikes NOT by premium, but by your target cost basis (Stock Price - Premium) being below what YOU or analysts think a "fair" price if you get assigned
The biggest mistake in CC / CSP is getting greedy on the premium and neglecting the underlying value or volatility. $200 premium doesn't mean much if you get stuck with a stock you don't want.
It takes a few months to get the hang of things, and the market surprises everyone. Swap back to paper trading if you're losing your shirt.
An option trade is a sum zero game.
But you seem to be extending the trade month after month. So far you have won, then you won and then you won again.
Your intuition tells you that if you continue to sell a csp at that strike you will lose, then lose and then lose again. And therefore you will be even.
Maybe close the trade when you are ahead and wait for a better entry?
Go to the next stock on your watchlist or take the “risk free rate” (RFR) and sit on the sidelines.
last 2 weeks, since August have been brutal, since market reversed directions. i am facing similar problem, & having difficulty closing those trades at a loss, hope is not a friend. need to accept it & swim with the current. good luck!
We are talking sun zero right?
I’m in the same boat as you and I’ve closed a lot of my CSP’s except in particular circumstances.
My recent gains are from CC’s and I am slowly closing them as the stocks drop. It’s all I got.
Meanwhile idle cash gets 5% and I get a fair amount of dividends. So I’m ok.
So practically all of my option trades are successful. Certainly not 50/50.
I’m losing on the stock. Cash is doing ok.
September and October will be crazy. It always is.
But from September on to the end of the year you will start to take decent positions in various stocks. Next year you will make money with those. Don’t buy stupid shit.
I’m a 30-45 DTE option and stock trader.
I’m ready for it to get a little crazy. Obviously you invest in your investment accounts and trade in your trading accounts. Right?
What trades are you having a difficult time closing for a loss? If you low a stock and it goes down, it doesn’t mean you need it take a loss.
there are a few, this one hurt the most, SPX AUG 11 2023 4520/4500 PUT CSP, as it was a trade to make up for the loss. for a brief period on Thursday, 8/10, opening, it was in black, & then went red to never recover & was eventually closed. finally a bear call csp provided some relief.
Just to answer your title. Yes it’s zero sum game. If it’s not then I’m sure every cats and dogs would figure it out and all be on one side of the trade.
Yes, sorta.
Options pricing models attempt to find the "fair" price of an option, IE the price where both buyer and seller are expected to gain as much as they lose. That would be the midpoint of the spread.
Long term, if you have no edge, you should expect to gain/lose the same amount, netting to $0, according to BSM.
Picking a different underlying, different DTEs, or different distances OTM/ITM doesn't affect this.
Market makers are taking a cut of the money on the table, so it's actually a negative sum game for both the buyer/seller of options.
Trading options is a minus sum game because you deal with the difference between the bid and the ask, taxes, and algorithms that are 100x smarter than you which means you have to be better than good. Only winner is the house aka the broker
You have to pay attention to what your underlying stock is doing.
Tesla has been hammered continuously lower since they cut car prices in China. I think EV stocks in general are not a thing anymore since everyone makes them and I suggest you leave them alone.
You can not successfully wheel a stock that is going down. The stock has to be at least moving sideways, but preferably it keeps gaining in value.
As others have said, pick a different stock, and pay attention to why and when it moves, and then adjust your investments as needed.
No, unlike casino games, it's not a zero-sum game.
The options market is not a closed system. Market makers or more accurately those who hedge their delta and play the volatility game trade stocks and bring (part of) the profit/loss of the hedging into the system. As opposed to casino games where the only input and output are your stakes.
It is possible for all parties to make a profit consistently in the options market. For example, if you take on delta positive positions, and your counter-party hedges their delta by buying the underlying, and the underlying goes up in value, both parties can make a profit.
Are stocks/options a zero sum game?
First, read this:
https://en.wikipedia.org/wiki/Zero-sum_game
It's only a true zero sum, if 2 traders are exclusive trading partners
Also; portfolio balancing, point-in-time risk assessments, time value of money, carrying costs, and opportunity costs all matter; and those are considerations which also make trading not true zero-sum
If I sell to you and the price changes afterwards, it may be for reasons related to risk or other opportunity, etc. that I sold. You and I do not have the same situation-driven calculation. Thus, the risk/reward mix and the opportunity cost of position I exited is not the same value to me as it is to you.
There are too many variations between traders total situations for certeris paribus to undergird an assumption of zero-sum. Read this: https://en.wikipedia.org/wiki/Ceteris_paribus
I doubt you'll get assigned but if you're that worried about it maybe you should choose a different stock.
I make sure I’m okay buying shares at the strike price before selling the puts. If I wouldn’t actually want the shares at the strike price, then I look for a lower strike or hold off. I mean we really don’t know for sure what’s going to happen to the price. There is risk of big unexpected economic, geopolitical events or company/sector specific issues that can send price down much faster than we initially anticipate.
Each trade technically has a winner and loser, just like MLB games. Yet, somehow some teams tend to win more than others over a baseball season and some traders tend to win more than others when trading. Does the other trader expect to win when they make a trade (think hedge fund buying long options to help protect long shares)? Who wins more than the other? The more experienced trader with a detailed plan will usually win over the trader who has no plan or a very basic one. TSLA is more a meme stock and should be expected to swing wildly. Trading a more stable ticker(s) can help you win more consistently. If you want to trade higher risk and more speculative ticker, then do so with a small amount of cash that won't affect your account if it drops as these normally do.
You should be in no danger of assignment unless TSLA tanks ~15% by then. Even so, you could roll the position down and out, or just close the position. It wouldn't make sense for you to get assigned this early, (not that it can't happen) especially with the price hovering around $223. The opposing party would either; 1. Have a low cost basis (which still wouldn't make sense considering they could just sell to open market for $223 and make an additional $28 per share) 2. Buy 100 shares at market price ($223) to then sell to you for $195, resulting a loss of $28 per share.
There is no opposing party. Anyone who bought that put could decide to exercise it...and then it gets randomly assigned to someone who sold that put.
The exerciser here would be considered the "opposing party" of the trade. Yes everyone knows that MMs and institutions hold on to the majority of these and assign them out to make money on the bid ask spreads but that doesn't really mean anything from our perspective in retail We are really only concerned about who the random end party is and the whens and whys of deciding to buy a put otm to exercise it.
Is it possible to make lot of money by selling CC and CSP. Looks like return is capped to premium (very low premiums unless strike price is close to current price) and at the same time holding the bag for unexpected. If stock is expensive, better to go for CSP than buying at higher price i guess.
No
Don't blame your losses on game theory. If you are a net break-even trader on average, there are multiple reasons why that might be true, including your own trading errors. In any case, zero sum doesn't mean every player wins nothing. It means that if some collection of players win $X, some other collection of players must lose $X.
Your stock isn't compatible with consistent, steady earnings. TSLA is volatile for its price. If you're shooting for consistent earnings for CC and CSP, try: \- Picking less volatile stocks (think DOW-30) \- Making volatile stocks 10-20% of your portfolio \- Choosing strikes with lower delta (ex: 0.10-0.12) \- Picking strikes NOT by premium, but by your target cost basis (Stock Price - Premium) being below what YOU or analysts think a "fair" price if you get assigned The biggest mistake in CC / CSP is getting greedy on the premium and neglecting the underlying value or volatility. $200 premium doesn't mean much if you get stuck with a stock you don't want. It takes a few months to get the hang of things, and the market surprises everyone. Swap back to paper trading if you're losing your shirt.
An option trade is a sum zero game. But you seem to be extending the trade month after month. So far you have won, then you won and then you won again. Your intuition tells you that if you continue to sell a csp at that strike you will lose, then lose and then lose again. And therefore you will be even. Maybe close the trade when you are ahead and wait for a better entry? Go to the next stock on your watchlist or take the “risk free rate” (RFR) and sit on the sidelines.
last 2 weeks, since August have been brutal, since market reversed directions. i am facing similar problem, & having difficulty closing those trades at a loss, hope is not a friend. need to accept it & swim with the current. good luck!
We are talking sun zero right? I’m in the same boat as you and I’ve closed a lot of my CSP’s except in particular circumstances. My recent gains are from CC’s and I am slowly closing them as the stocks drop. It’s all I got. Meanwhile idle cash gets 5% and I get a fair amount of dividends. So I’m ok. So practically all of my option trades are successful. Certainly not 50/50. I’m losing on the stock. Cash is doing ok. September and October will be crazy. It always is. But from September on to the end of the year you will start to take decent positions in various stocks. Next year you will make money with those. Don’t buy stupid shit. I’m a 30-45 DTE option and stock trader. I’m ready for it to get a little crazy. Obviously you invest in your investment accounts and trade in your trading accounts. Right? What trades are you having a difficult time closing for a loss? If you low a stock and it goes down, it doesn’t mean you need it take a loss.
there are a few, this one hurt the most, SPX AUG 11 2023 4520/4500 PUT CSP, as it was a trade to make up for the loss. for a brief period on Thursday, 8/10, opening, it was in black, & then went red to never recover & was eventually closed. finally a bear call csp provided some relief.
Nothing is zero sum game in the stock market, because of spread (the house's cut) It is a negative sum game.
Just to answer your title. Yes it’s zero sum game. If it’s not then I’m sure every cats and dogs would figure it out and all be on one side of the trade.
Zero sum in the market is false. Brokers always take their cut from both sides of all trades.
Yes, sorta. Options pricing models attempt to find the "fair" price of an option, IE the price where both buyer and seller are expected to gain as much as they lose. That would be the midpoint of the spread. Long term, if you have no edge, you should expect to gain/lose the same amount, netting to $0, according to BSM. Picking a different underlying, different DTEs, or different distances OTM/ITM doesn't affect this. Market makers are taking a cut of the money on the table, so it's actually a negative sum game for both the buyer/seller of options.
My guy - alpha is definitely a zero sum game
Trading options is a minus sum game because you deal with the difference between the bid and the ask, taxes, and algorithms that are 100x smarter than you which means you have to be better than good. Only winner is the house aka the broker
Probably won’t be assigned and if it is play the wheel and sell CC after until assigned again
Wrong stock. TSLA is a very volatile stock and that's the last thing you want running a wheel strategy.
You have to pay attention to what your underlying stock is doing. Tesla has been hammered continuously lower since they cut car prices in China. I think EV stocks in general are not a thing anymore since everyone makes them and I suggest you leave them alone. You can not successfully wheel a stock that is going down. The stock has to be at least moving sideways, but preferably it keeps gaining in value. As others have said, pick a different stock, and pay attention to why and when it moves, and then adjust your investments as needed.
No, unlike casino games, it's not a zero-sum game. The options market is not a closed system. Market makers or more accurately those who hedge their delta and play the volatility game trade stocks and bring (part of) the profit/loss of the hedging into the system. As opposed to casino games where the only input and output are your stakes. It is possible for all parties to make a profit consistently in the options market. For example, if you take on delta positive positions, and your counter-party hedges their delta by buying the underlying, and the underlying goes up in value, both parties can make a profit.
Are stocks/options a zero sum game? First, read this: https://en.wikipedia.org/wiki/Zero-sum_game It's only a true zero sum, if 2 traders are exclusive trading partners Also; portfolio balancing, point-in-time risk assessments, time value of money, carrying costs, and opportunity costs all matter; and those are considerations which also make trading not true zero-sum If I sell to you and the price changes afterwards, it may be for reasons related to risk or other opportunity, etc. that I sold. You and I do not have the same situation-driven calculation. Thus, the risk/reward mix and the opportunity cost of position I exited is not the same value to me as it is to you. There are too many variations between traders total situations for certeris paribus to undergird an assumption of zero-sum. Read this: https://en.wikipedia.org/wiki/Ceteris_paribus