Time and Position Trades

It is very difficult for most people over the long-term to make money buying options on a regular basis. The main reason for this is two-fold. When you buy an option with a month or two until expiration, you have to be right in the direction that the stock is going to move AND you have to be right on the timing of the move...that is, it has to move pretty soon or the time value of the option will work against you too much.

When you sell options (ie, covered calls and credit spreads), the strategies tend to be a little more forgiving. This is due greatly to the fact that you will have the time value working for you.

Another benefit of covered calls and credit spreads is that they are what I refer to as "position trades". That is, once you enter the covered call position or the credit spread, generally, you don't need to watch the screen all day. Such is not true when you are buying options. Generally, when you buy options, you want to keep close tabs on it during the day in case it makes a run one way or another so that you can make a move if needed. Thus, the covered call and credit spread techniques fit in to many people's lifestyle much better than other stock option strategies.

When you sell options (ie, covered calls and credit spreads), the strategies tend to be a little more forgiving. This is due greatly to the fact that you will have the time value working for you.