If you have spent any time researching trading schools or trading signal services, you undoubtedly have come across many that claim that buying options is a proposition that loses up to 90% of the time and thus you should always take the other side and sell options. Sound great right? Problem is that these claims are based on false premises. Here is just one of the quotes I have found out there:
“Over 75% of all options held until expiration expire worthlessly . . . That’s why you should do what the pros do and sell options to other people. After all, if most of them will expire worthlessly, why not collect some money for them today while they still have value?”
Here’s how the numbers break down according to the OCC (Options Clearing Corporation):
According to historical OCC statistics for the year 2015 (for activity in customer and firm accounts), the breakdown is as follows:
- Position closed by selling the option: 71.3%
- Exercised: 7.0%
- Held and allowed to expire worthless: 21.7%
The important thing to remember is that buying options have its time and place and selling options have its time and place. Painting yourself into one corner or the other is a fool’s errand.
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