InvestorQ : Is it possible to use options to reduce cost of holding a stock where I am stuck at higher levels?
Tisha Malhotra made post

Is it possible to use options to reduce cost of holding a stock where I am stuck at higher levels?

Answer
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Moii Chavate answered.
2 years ago


If you are holding the Tata Motors stock as in the above case, you can sell higher OTM calls. Since the calls will expire worthless, the premium will be your income. You can do this consistently for a number of months and reduce your overall cost. There is not much risk on the upside but there is risk is on the downside. Do option buyers make money? Globally, it is estimated that 80% of all option buyers do not make money. That may be misleading because most options are bought for hedging their risk and not for trading at all. On the other hand, options are sold largely for trading. But, since option sellers are savvy traders, making money by buying options is surely difficult.