@jerschneid Any chance you might do a piece on options trading?
While I’m certainly a big believer in the buy and hold low-cost index funds philosophy you espouse (thanks to you!), I’ve heard that options trading can hedge against stocks whether they go ‘up, down or sideways…’. My best friend has been trading options for the last 2 years with guidance from his mentor who has been doing it for 10 years and the returns he is getting are looking pretty good. He also says he’s no more exposed to risk if a market crashes than I am investing in Index funds.
I’m trying to better understand:
- how options contracts are able to hedge against stock price movements
- if and why options contracts are more or less risky than buying individual stocks
- why specifically options contracts are more risky than buying index funds
- In the event of a market crash/correction, in what scenarios does dollar cost averaging into index funds hedge better than options contracts? Can you just dollar cost options contracts on a basket of stocks?
- Is there any reliable historical data you’d suggest that shows how well options contracts traders have done overtime (is it similar to picking individual stocks where 90% don’t beat the market?)
I’ve done some research on my own, but I haven’t really put it all together in my head yet. Just wondering if you’d be interested in giving this topic the Jeremy Schneider Treatment