FT Options trading

Read this article on SeekingAlpha today. Will FTrade let us place options? :slight_smile:

"With the pandemic limiting many choices this year, investors dove into options. Bad pun, but the statistics are astounding. Check out the following few data points:

• Around 39M options contracts have traded daily on average this year, rising 35% from 2020 and the highest level ever - Options Clearing Corp.
• Retail investors represent more than 25% of total options trading activity due to access via commission-free brokers - Alphacution Research Conservatory.
• The average daily notional value (volume multiplied by spot price) of traded single-stock options climbed to more than $450B in 2021, compared with $405B for stocks - Cboe Global Markets.
What’s fueling the surge? Hot trading apps and social media hype has seen retail crowd pour into the market since competition between brokerages eliminated trading fees in 2019. While stocks were the initial focus, much of the attention today centers around options, which allow traders to notch big returns (or losses) without having to actually purchase shares. Besides the leverage, many investors are also using derivatives as a hedge, such as protecting their portfolios against sentiment changes - a good example of this was the recent Fed meeting.

It’s also been a big win for the brokerages, which are scoring some big bucks off the options rage. Popular brokerage Robinhood (NASDAQ:HOOD) even generated $164M from options trading in the third quarter, more than triple its transaction-based revenue from traditional stock trading. Activity has also been prominent in the so-called meme stocks, which initially created massive short squeezes in names like GameStop (GME) and AMC (AMC), but eventually created a swarm trading strategy of its own.

Some caution: The increased engagement is attracting the attention of regulators like the Financial Industry Regulatory Authority. Wall Street’s self-regulatory arm is considering whether changes to the options rules may be warranted, including regulations around options account approvals, supervision and margin requirements. FINRA’s request for comment will be published in the coming weeks to solicit insight from exchanges and brokers about options trading and the risks involved."

Here is the actual URL to their post for completion.
https://seekingalpha.com/market-news/wall-street-breakfast?mailingid=26147449&messageid=&serial=26147449.487265&utm_source=seeking_alpha

I’d say this goes against everything Freetrade claim they want for their customers.

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I certainly hope Freetrade never touch CFD / options / futures.
Their whole brand is about making long term investing easy and accesible.
I’m sure they don’t want to ruin that by letting inexperienced customers access products that end badly for most retail investors.
Just because a lot of people are diving in to options trading doesn’t mean it’s a good thing.
The article only mentions Robinhood making a load of revenue off the back of it; I wonder how many actual investors are in the green?

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Agreed!

Despite what others are doing I’m not mad on the idea of freetrade getting involved in crypto/options/futures or CFDs.

Someone could join and could lose big on any of these and it will put them off investing.

Despite the views of some I thing freetrade is taking the correct path.

I hold £8s worth of bitcoin (price taken from time of purchase) and even I don’t wish to see freetrade become a one stop shop for all trading activity.

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Who here trades options? For me, I like taking a simple straightforward approach with options. It’s all about taking your existing dividend stocks and then selling puts and/or covered calls to boost your income. With all the volatility out there (less than before), now might be a great time to sell options (sell volatility).

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I’ve been tempted to back test Zedd Monopoly’s strategy of scalping the news and earnings reports. It just seems too good to be true :man_shrugging:t3:

For example Apple getting downgraded to “sell” by Goldman Sachs, open a sell option on 100 shares and scalp the 1.5 to 2% on the drop.

Anyone tried this strategy? Risky as it needs at least 1k put at risk.

Is this with US equities only or other asset classes? Which platform from the UK allows for options?

The UK is heavily limited on options for stonks. Missing so much gains due to not having a RH style options platform like the US

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This will likely never be introduced as it’s seen as being in conflict with the long-term investing that freetrade wants to promote.

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Hi all, I want to have an open thread on this. Similar to what Robinhood offers, I think it would be good to have options trading (calls, puts, etc) available in Freetrade at some point.

For example, at some cases it might be worth to buy a call option instead of buying the stock itself. If you buy a call option, you have very low risk because you only pay a small premium (which is smaller than what it would have cost to buy the same size of stock), but you have unlimited upside profit potential (depending on expiry date).

Note: I am not talking about spread betting, I’m talking about actual options trading via broker.

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Please use the search, this has been discussed many times on here already:

Freetrade’s market is long term investors. What you described is gambling. I don’t think they want to be a gambling platform.

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Ok Thanks. I was not talking neither about spread betting nor about leverage/margin.

When the option expires you have the right to buy the stock at expiration price. So, this is another method of having exposure to a stock (including long term exposure), with different risk profile.

My interest is not on buying and selling options in 1 or 2 days. My interest was more on buying a call option with the objective to convert to getting the stock at expiration for long term, whilst having protection (limited downside risk) if it falls a lot until the expiration date.

I am a long term investor, not a gambler. Just thought what if we also had this as a complementary tool

I think the risk is many people will (and do) treat options like a casino.

There are certainly sensible (non-gambling) ways a long term investor can use options, for example I’d like to be able to buy shares by writing puts and write covered calls on my larger positions for extra income. The thing is I’d undoubtedly also gamble with them.

The ability to write fractional options in a SIPP would be a huge USP, but I don’t see that happening any time soon.

The problem is as soon as you offer options people will still start treating FT like a casino, just like RH. That’s a path FT doesn’t want to go down.

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Options trading is closer to gambling than one might like. If the market moves against you, all is lost whereas rarely does a stock fall from its current level to zero, and normally (and I accept not always) one has the opportunity to sell before the share price reaches zero. With options, if the price moves the wrong way and stays there during the option term, all is lost. Clearly, there is an upside if you went the right way

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Some investors ‘protect’ their direct share portfolio by placing a few options hedges in times of volatility. You could use a different platform to do this should you feel the need.

I understand many US investors with large portfolios do hedge using options.

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Options will never be a feature on FT. It’s a platform for beginners, after all. You would do well to use a different platform.

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I think maybe thinking in terms of investing vs. trading might help this debate. Investing is long term, infrequently changing positions, savings/protecting your financial future as opposed to trading which is typically intra-day change of positions based on whatever strategy you think might work, using leveraged instruments(vanilla options, etc…).

FT is positioned very much for investing. Indeed is mentioned every time one the founders discuss their mission and comparing it with RH.

After all, the addressable market for investing is orders of magnitude bigger than people who want to use leveraged instruments.
Yes, what RH have done is basically increase/redefine the trading user base by making extremely seamless for beginner retail to invest in option and gamifying it. Is it ethical ? IMHO, no. This is pure gambling. Experienced traders with 10s of years of experience blow up every now and again, especially in today’s interconnected and completely unpredictable markets.
Add to this the experts, who sell subscriptions to trading signals and recipes to get rich quick by “trading the markets” using options and you have the recipe for disaster.

FT’s mission is to make it easy and cheap for everyone to invest in stocks and share in the success of companies they believe in, with a long term horizon that helps them save and protect their future. This is incompatible to allowing people to underwrite put options on $TSLA and expose them to the risk of completely losing their net worth if greed gets the better of them.

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However, FT, if you decide to add equity options on the platform, give me a shout as I have loads of experience :slight_smile: (half-joking)

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