If you enjoy investing and can spend some time learning about trading options, it can provide a nice income stream in a taxable account. Somewhere around 0.5-1.0% income a month is possible and reasonable without taking on extreme risk.
Income from options on indices or futures is subject to 60/40 long/short term capital gains tax and really helps keep the tax costs down.
Options are potentially the most complicated common financial instrument and modeling their risks is extremely difficult. Moreover, unlike equities, nearly every single options trader is an institution (versus just ~most equities trades being institutions). You are a tuna in a shark tank.
There are so many ways to blow up your account with options even if you think you’re not doing anything too risky. Volatility crush, long tail risk, complicated positions (butterflies and condors etc) that can be complicated to enter and unwind. Etc etc the list is so long. Brokerages can try to paper over some of these issues but the playing field here is inherently a highly leveraged minefield. ~80% of all options expire worthless.
Retail investors should not trade options, it is not something to do lightly, and is is certainly not something to do for pocket money.
I disagree. Not with the facts stated, but your interpretation of them. With defined risk positions, the risks are easy to understand. Of course you can't compete with the institutions, but should that be a reason not to invest at all?
Again, with defined risk positions there is no way you can blow up an account. Options expiring worthless works for you if you're a net seller. Others have written extensively about strategies: https://earlyretirementnow.com/2019/03/27/passive-income-thr...
This is not something someone should do without the prior research. It's not for everyone. But compared to something like opening a small business (which I haven't done, but would consider very risky) at least in this "business" your risk can be defined.
That said, the only riskless options/futures trade is called a “cash and carry” which essentially earns you the risk-free rate and isn’t much better than buying a treasury note. Also with interest rates so low, you’re more likely to get like 0.5% per year rather than per month
It's not for everyone, but only if you want to learn and take matters into your own hands as opposed to simple buy and hold investing. People may recommend not opening a bar for passive income, but it looks like at least someone in here is doing it well.
Of course there's no free lunch or ways to make any considerable profit without risk. But compared to holding long stock, you can take defined risk positions that are more/less risky.
Comments
If you enjoy investing and can spend some time learning about trading options, it can provide a nice income stream in a taxable account. Somewhere around 0.5-1.0% income a month is possible and reasonable without taking on extreme risk.
Income from options on indices or futures is subject to 60/40 long/short term capital gains tax and really helps keep the tax costs down.
This is irresponsible advice.
Options are potentially the most complicated common financial instrument and modeling their risks is extremely difficult. Moreover, unlike equities, nearly every single options trader is an institution (versus just ~most equities trades being institutions). You are a tuna in a shark tank.
There are so many ways to blow up your account with options even if you think you’re not doing anything too risky. Volatility crush, long tail risk, complicated positions (butterflies and condors etc) that can be complicated to enter and unwind. Etc etc the list is so long. Brokerages can try to paper over some of these issues but the playing field here is inherently a highly leveraged minefield. ~80% of all options expire worthless.
Retail investors should not trade options, it is not something to do lightly, and is is certainly not something to do for pocket money.
I disagree. Not with the facts stated, but your interpretation of them. With defined risk positions, the risks are easy to understand. Of course you can't compete with the institutions, but should that be a reason not to invest at all?
Again, with defined risk positions there is no way you can blow up an account. Options expiring worthless works for you if you're a net seller. Others have written extensively about strategies: https://earlyretirementnow.com/2019/03/27/passive-income-thr...
This is not something someone should do without the prior research. It's not for everyone. But compared to something like opening a small business (which I haven't done, but would consider very risky) at least in this "business" your risk can be defined.
I’d recommend staying away from options.
That said, the only riskless options/futures trade is called a “cash and carry” which essentially earns you the risk-free rate and isn’t much better than buying a treasury note. Also with interest rates so low, you’re more likely to get like 0.5% per year rather than per month
It's not for everyone, but only if you want to learn and take matters into your own hands as opposed to simple buy and hold investing. People may recommend not opening a bar for passive income, but it looks like at least someone in here is doing it well.
Of course there's no free lunch or ways to make any considerable profit without risk. But compared to holding long stock, you can take defined risk positions that are more/less risky.