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cropsey, il 61731 | It's like just about all of them isn't it? Selling it like insurance is a good strategy since you never get your insurance premium back unless there is a problem and I would say it's the same deal with options. The question is does a guy really need to give up $1 to sleep better at night? At that cost I would rather make a cash sale and be done with it.
Correct me if I'm wrong, but usually option values fit the conditions and rarely make anyone money unless something changed pretty drastically. I realize this is what is being insured (drastic change), but the high cost makes me look for alternative strategies. In theory on a quick market upturn a guy would like to capture that new higher price, but in volatile times the cost of the option often offers little advantage
ie. price goes to $6 cash, $6.25 put option costs 50 cents (or more). the market 'knows' price will be retreating so it's priced accordingly. The market 'knows' because there are enough traders on the 'right side of the trade' (defined as where enough of the traders are not necessarily fundamentals). The high price of the options indicates that's how far the trade plans to move the market anyway. Kind of a 'self fulfilling prophecy' type thing. Make sense? At least this is how it appears when the market isn't surprised.
Btw, of course an advisor wants everyone to spend lots of marketing. That's how he makes his yacht payments.
In the end we are all gamblers to an extent and taking a small risk in the market may be a great strategy to sleep better at night or keep a banker happy. It's way too expensive to eliminate all risk, but there are lots of folks trying to sell this program. | |
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Mark Gold
