Last shot on options...
I have traded options in the past. I used them to hedge a very large Intel portfolio I obtained through the employee stock option program. I hedged rather than sell to get long term tax treatment. In options trading, for every dollar you make, somebody else is losing a dollar. Therefore, to make money on options requires you to be "smarter" than the market. To make money on stocks requires you to be simply average. As a matter of fact, investors that are well below average can still make significant money on stocks. A below average investor can quickly lose a fortune on options.
There was this group at Intel that "found out" about writing covered calls. They thought they had found this free money printing machine. The options always expired worthless and they had money in their pocket. Then one month came along where the stock had a HUGE run up. Should they give away their stock? It was on a huge run and looked like it would keep going. Most chose to simply pay off the calls. They lost everything in that one month that they had made in the previous 12... The zero sum game in the long run, minus spreads and commissions.
To continue with the gambling analogy, there are poker players that are good enough they are pretty much guaranteed a return. They get this return because there are bad poker players out there. Perhaps you believe you have such skill in the stock market. Personally, I just stay out of the game and keep my money where there is a much higher chance of return regardless of my performance.
Perhaps my attitude and opinion has more to do with my current situation than anything else. I am retired with a significant nest egg. My long term plan simply requires me to get an average of 6.5%/year return. I can be a below average investor in stocks and still hit my goal. To hit my goal with options requires me to be significantly above average. I am not so arrogant as to think I can execute better than others...
--Alan
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