Comment by sokoloff
6 months ago
You also need an idea that's somehow different from the rest of the market. (It's the difference of opinion/point of view that makes a market.)
If everyone has the exact same expectations as you, no one is going to offer you the options trade structure at a price that would be profitable for you.
Need for a different idea depends on the full size. If there are 10 shared available for $10, then nearly anyone could buy them all up and so all ideas are saturated at just one poor person. However if the idea is for a large company there are thousands of shared traded every day, and so if your idea is the company will go up in value almost nobody could buy enough shares to make a difference - even rich would struggle to find enough free money to move the value of the company by $1.
In the market there are ideas on all levels, some really are the $100 trade that will make money but that is the most possible to trade. However many ideas are on the large end where there is plenty of room for more people. If you think a fortune 100 company is under valued by $10/share you can make a ton of money (assuming you are right of course) and safely tell all your friends without affecting your ability to make money.
> If you think a fortune 100 company is under valued by $10/share you can make a ton of money (assuming you are right of course)
Inherent in this $10/share profit opportunity is that not everyone agrees with you. (If everyone did agree with you, the discrepancy/opportunity would collapse from $10 to under a penny.)
There is the risk. Those who don't agree might be right. However we can see at larger changes in price over a year all the time so sometimes the others are wrong.
telling which is an evercise I can't help you with. I invest in index funds.
Of course, but at the scale of a responsible retail options gambler (think a high six to low seven figure bankroll, properly managed), you can pretty reliably find people willing to take the other side of your seeming long shot. The temptation to pick up pennies on the train tracks is ever present.