A lot of option gurus say its better to sell options since almost all all stock options expire worthless….

So many options courses say its better to sell options since 70% of all stock options expire worthless….

Some option gurus argue to sell stock options because 90% of stock options expire worthless. Here’s an honest person that demonstrates why that’s not true….

People say selling options gives you an edge because most options expire worthless. Here’s a believable article that explains why that is not true….

I have a follow up question. Using your example of the $50 put option on XYZ with the stock XYZ trading at $40 at the expiration of the option.

If I am assigned on 10 lots, that’s $50,000 of cash I need to make the purchase when assigned. If I only have $10,000 cash in my account and no access to additional funds, what happens?

I thought that when you are assigned the stock you have the ability to just sell the shares you have been assigned on the following trading day without regard to the margin requirements? “same day substitution” as the term. If that’s the case, why do I need any cash to make the purchase? As long as I have enough cash or marginable securities to cover the loss, (($40 or current market on following trading day -$50)*1000) isn’t that all you need in your account due to the same day substitution rule?

The 5% – 15% return, in the context of that article, is only a % yield on margin per position and is realistic. However you obviously never margin your entire account balance. After scoffing at the claim, as predicted by the quote, Mark continues on to debunk the claim by completely misrepresenting it as a claim that promises 5% – 15% returns on your entire trading account.

The expiration graphs of the non-directional postions taught by Sheridan (and probably Mark Sebastian as well) present the possibility of VERY HIGH yields at expiration. These trades are a lot of work and take serious amounts of time learn and work on through various price and volatility climates. I’ve been at it for 2.5 years. But still, the most difficult part for me is walking at away at only 5% when 150% appears to be sitting right there just 2-3 weeks away.

Incidentally, Sheridan (since I am on the topic I guess) demonstrated 12 months of butterfly trades that when adjusted as required yielded a 100+% annualized return in a paper account (including losses). Although he presented one harrowing caveat: had it been in a real account you would need to take out 30% for slippage.

I was disappointed by this particular debunking – seemed unnecessary. I liked everything else about the presentation though.

Brent