Comment on Introducing Sensibull -- the Options Trading Platform

Abid commented on 13 Dec 2018, 05:24 PM

Hey Vijay,

Thanks for your comment. It gives me an opportunity to clarify things with people who follow us on public fora. Let me put a few points forward.

1) “Buying Options loses money in the long run”.
This does not mean do not buy options. This does not mean option buying is stupid. Buying an option isn’t a losing trade the same way playing Russian roulette is a losing trade. It’s not a stupid thing to do.

2) I am not a trainer or a financial adviser. But I am not sure if you need to be one of those to have a view on something which is statistically evident. Statistically, 75-85% of the options expire worthless. You can get enough stats on that with a cursory google search

3) We have always asked people to sell with protection. In case of naked option selling, there are risks. But they are greatly diminished the moment you buy. And we have been die hard preachers of keeping risks limited

4) Buying options presents a unique loser level problem. Technically, someone can blast his entire account on OTM purchase. A sell spread restricts the bet size to the margin available. So sell options work out better for a lot of retail investors who have a tendency to double up and buy OTM lotteries. This unique psychological problem trumps any statistical fat tail advantages buying options can present.

To answer your question on option buying wouldn’t exist, let me put it this way

Insurance companies make profits by selling insurance. Most people’s insurance never comes useful as they live long full lives. That never stopped anyone from buying insurance. You would not think “LIC will make money off me in insurance, let me not make them profitable.” You will think, “What if in the rare chance I get a call from above” 🙂

I hope that helps

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