Re: 4 ways to lose, only 1 way to win

If a Call expires worthless OTM then the Put expired ITM so how can
you say that "70% to 90% expire worthless".  Based on the 'one loses
and the other wins' of equity / index options then the only other
factor to consider is the cost of the position to be overcome by the
buyer.  So adding the costs of option price, spread, and commission
means that yes, the buyer is at a disadvantage,  Another risk is
pricing.  Paying too much or receiving too little tilts the odds
against the option trader.  Since volatility has the most influence on
option pricing, then being right about volatility is more important
than being right about direction since on average all will be correct
around 50% of the time.

There is a wealth of inexpensive option knowledge in good books and to
be found free on the www.  If Abe Lincoln could do it (self education)
then anyone can do it who has the ability to learn.  If not, then use
options sparingly as insurance against gaps and stops for erosive
losses.

arthur
--
On Wed, 26 Nov 2003 16:25:57 -0600, "Rumery" wrote:
>
>Bottom line, you must look at two factors.  Winning % and
> win/loss ratio.  If you have a situation where you have
> 50% winners and a 1:1 win/loss ratio (your wins are the
> same size as your losses), you will only break even. 
> Since between 70% and 90% of all options expire worthless
> (depending on what statistics you are looking at and the
> type of options...i.e. in the money, at the money, out of
> the money), it is a difficult thing to win 50% of the time
> buying options.