A few months ago, the entirety of my portfolio was options positions. Over the past couple of weeks, I have shifted more and more into equity positions (that is to say, short-sales instead of being long puts).
Options have been pretty good to me. Perhaps my biggest “achievement” related to them is the creation of Slope’s Options Charts, which is a true source of pride and joy to me. Importantly, it provides me insight as to when options that I’ve sold went on to much bigger price gains…………
……..or those which I’m glad to have dumped!
But why the switch? What’s wrong with options?
Nothing, particularly. I like the number three, so let me offer up three reasons for this switch:
- Bid/Ask spreads – I’ve grown weary of lousy bid/ask spreads on options. Sure, there are some heavily-traded options which don’t have this issue, but oftentimes the kinds of equities which intrigue me have options whose bid/ask spread is 5% to 10%, which is nuts. Worse yet, especially during volatile times or early in the trading day, the spread is just absurd, like 40%. No thanks. With stocks, you’re usually dealing with just a penny or two.
- No Need for the Leverage – After the rotten time I had between late 2022 and mid 2024 (a long time, to be sure) I was aggressively rebuilding my portfolio, and I needed to take on more risk for higher potential gains. That worked out, and frankly at this point I’ve got large enough portfolios that I don’t need to be messing around with puts. I have plenty enough cash to be taking on dozens of large equity positions.
- More Flexible Hours – Options can be traded between 9:30 a.m. and 4:00 p.m. Period. End of story. Stocks, on the other hand, can be traded before and after hours. It isn’t optimal, because the volume is lousy and the bid/ask spreads are usually pretty bad, but it’s nice to know that if for some reason I want to get in or out of a position (either wholly or partly), that opportunity exists.
The quantity of options positions I’ve got has dwindled from dozens down to merely four, and I suspect in the weeks or months ahead it’ll probably head to zero. This shouldn’t matter to anyone, to be honest, but I at least wanted to explain what was going on.
