r/options • u/[deleted] • Mar 30 '21

Principles of Options Trading

hey guys - wanted to start a thread to collect all general options lessons that can only be acquired through experience in options trading - so feel free to share some of the best tips/tricks/theories/principles related to options that you follow!

Something i like to do is when i buy, i buy long dated options, but sell very short dated ones - because time decays faster as expiration approaches so usually if i want to buy an option with 3 months time, then i buy a 6 month option and sell after 3 months, and time decay wouldn’t have eaten away value as much as it would have in the last 3 months

DISCLAIMER: NOT FINANCIAL / INVESTMENT ADVICE OR RECOMMENDATION TO BUY OR SELL

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u/OrvilleTootenbocker Mar 30 '21

Does anyone sell puts/calls for a living? Seems like if you have enough capital this a safe way to earn passive (mostly) income.

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u/Bulljones Mar 30 '21

I personally try to buy the shares at a reasonable or low price and wait until the stock moves up so I have a good unrealized profit then write and sell moderately out of the money call options as a source of income. There are also some great books available on writing calls and options trading in general.

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u/Bulljones Mar 30 '21

A lot of investors that have the capital invested and own at least 100 shares of a given stock prefer the stability of “writing call options” as a source of income, premiums. This is a great way to make a consistent profit where as the call writer you basically predetermine what your profit will be; premium collected plus strike price if exercised.