Option Trading
Quotable Quotes
"Option Trading Quotable Quotes"
On Writing Covered Calls
"By writing the call option, we have in reality made three trades: one in the asset itself, a second in the call option, and a third involving risk.
We've traded some amount of possible profit for a direct reduction in the risk of the position. Whether the market moves in the fashion the other trader prefers or in the fashion we prefer, we've laid of two chunks of risk. The contest risk is gone completely , and we can now also suffer some adverse movement in the price of the asset without incurring any loss of our initial capital. Put very badly, for us to end up with a loss on this trade, the other market participants must now come and take money out of our pocket instead of the usual case of us voluntarily paying them to enter the trade. This is a hugely useful advantage, especially when considered over a long time frame involving a large number of trades."
S. A. Johnston
Note: Contest risk here refers to the money you need to pay to get into a trading position that you wish, which is basically the round trip commission charges imposed by your brokerage company.
On Option Characteristics
"Options come in all sizes, shapes and forms. Some are built for speed and daring; others for dependability and smooth sailing. Still, others are very crafty, putting the odds in your favor. Which suits you?"
Thomas McCafferty
On Cutting and Offsetting Losses for Option Trades
"Trying to offset a losing short option position with futures contract is like trying to get rid of the rats in your garage by releasing rattlesnake. You may get rid of the rats, but then what?"
The Complete Guide to Option Selling
James Cordier / Michael Gross
"Although it is true most options expire worthless, you never know for sure how many times they changed hands before expiration. Many novice traders don't think about this. They believe they can sell options and simply wait for them to erode into nothingness. This can be a very dangerous and costly point of view."
Thomas McCafferty
Trading Quotable Quotes Main Page - On Risk and Risk Management
TQQ Part 2 - On Being Patient / Mr Market and Respecting the Market / Market Timing / Trading the News
TQQ Part 3 - On Stock Selection / Success Rate of Trades vs Making Money / Entries & Exits
TQQ Part 4 - On Setting Stop Losses and Preserving Capital / Outcome of Trades / Technical Analysis / Trader's Mindset & Investment Psychology / Contrary Trading
TQQ Part 5 - On Trend Following / Going With The Flow / Letting Winners Run / Averaging Up / Discipline / Recovery
TQQ Part 6 - General Topics related to Trading
Option Trading Quotable Quotes
Fundalmental Quotable Quotes
Non Trading Related Quotable Quotes
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