First and foremost, it is a proven fact that 75% to 80% of all options held to expiration expire worthless. This is a huge advantage even before fundamental and technical research is done, which can increase one’s odds of success to upwards of 97% to 98%. Also, the unlimited risk factor can be mitigated in many ways to lessen the risk of potentially large losses by providing limited risk on one’s trades. This is primarily done by using vertical spreads and credit ratio spreads.
Another advantage of selling options is that one does not have to try and pick the market direction. Remember that unlike stocks, which only increase in value if the market rallies, options can be profitable whether the market goes up, down, or sideways. The only requirement is that the price of the underlying does not reach the option strike price that is sold.
Finally, timing the markets is not a requirement when selling options. Since the markets can move up or down without affecting profitability, when a good trade manifests itself, it can be taken advantage of immediately. As the markets move up and down, time works in the seller’s favor by causing the premiums of the sold options to decay nearly every day, right up to expiration.
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