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can Put/Call options on a stock can give any insight/predictions
Any expectations of the stock price that is reflected in Put or Call contracts should be reflected in the stock price as well. This should be true in the aggregate as well. It doesn't have to be the case if something is mispriced, but that's not easy to see unless you know quite a bit about the options and the underlying security (and probably a good bit of math).
If you want to know stock prices in the near future, flip a coin.
From your question, I assume you are investigating the put/call options market as a strategy to enhance returns and not as a risk mitigation hedge.
Don’t do it unless you seek risky adventures, have a rock solid risk tolerance, or are a professional with significant investment resources and extensive mathematical skills. Even then, your excess returns are likely to be razor thin when measured against market rewards.
I completely concur with NickF. It is a pure gamble, a flip of the coin or a roll of the dice, for we individual investors. Some research suggests that a few rare professionals persistently win, but not many.
The accumulated evidence shows that individual investors loss more money from options then from equity investing in a relative sense. Remember that the average individual investor underperforms the actively managed mutual funds that he owns which in turn underperform their passive Index fund counterparts.
Poor timing habits and the cost structure further exasperate the investor’s poor performance in the options marketplace. Indeed, it’s a sad tale.
The experimental evidence is compelling. You can access many of the studies on the Internet. Some of the product commercials are attractive, but it is really a trading trap. Exogenous world events always operate in a manner to disrupt and destroy the utility of the volatility estimates that are embedded in most options pricing models.
Comments
If you want to know stock prices in the near future, flip a coin.
From your question, I assume you are investigating the put/call options market as a strategy to enhance returns and not as a risk mitigation hedge.
Don’t do it unless you seek risky adventures, have a rock solid risk tolerance, or are a professional with significant investment resources and extensive mathematical skills. Even then, your excess returns are likely to be razor thin when measured against market rewards.
I completely concur with NickF. It is a pure gamble, a flip of the coin or a roll of the dice, for we individual investors. Some research suggests that a few rare professionals persistently win, but not many.
The accumulated evidence shows that individual investors loss more money from options then from equity investing in a relative sense. Remember that the average individual investor underperforms the actively managed mutual funds that he owns which in turn underperform their passive Index fund counterparts.
Poor timing habits and the cost structure further exasperate the investor’s poor performance in the options marketplace. Indeed, it’s a sad tale.
The experimental evidence is compelling. You can access many of the studies on the Internet. Some of the product commercials are attractive, but it is really a trading trap. Exogenous world events always operate in a manner to disrupt and destroy the utility of the volatility estimates that are embedded in most options pricing models.
Just stay away.
Best Wishes.