This "options are too complex" language is just silly. Retail investing doesn't work as it's been taught! It underperforms the market and professional investors, and it doesn't have to. You don't have to run complex positions, selling a vertical spread is every bit as easy as buying stock (one transaction to open the position, one to close it, and sometimes you don't need to close it.)

Anybody who wants to tell me options are risky has to explain this: Suppose you want to capture upside in, say, Amazon. Why is it riskier to sell a put spread or buy a call spread, in either case risking just a few hundred dollars, than it is to buy shares when just 25 will cost you $7500 or more?

The fact that you mistook the value of theta decay and IV in my proposed scenario of selling a covered call makes me think you just don't understand some of these things. And that's not your fault, it's a huge fail IMO that the retail investor has had to learn the finer points of front load vs back load on some overpriced mutual fund but has been taught that options are scary.

Again, I do not advocate for taking long option positions and I definitely think you should check out TastyTrade.com to learn a bit more about the philosophy.

What I actually suggested above was buying the SPYs and selling covered calls. The only risk you're taking on is limiting your upside to your strike price.

Tell me this: what can an investor do to increase his probability of success in a trade other than reducing basis? The argument for reducing basis is simple: Reducing the amount you've paid for the shares, making them cheaper for you than somebody just buying the stock, gives you an edge.

The monthly sd in SPY is $9. So yes, if you sell the $205s, 85% of the time the calls you sell will expire worthless OTM, and when that happens if you roll your position forward another month, doing that will increase your total profit over just holding the stock. Limiting upside to increase odds of profitability is the lynchpin of professional trading strategies. And that's what you're doing here.

And yes, selling 1 and 2 lots, commissions do absorb a larger percentage of your PL than on bigger transactions. And complex strategies that require 4 legs like an Iron Condor won't be profitable at that size, it also happens that an IC is a low-risk strategy (and thus small effect on your buying power) so in those cases you can increase the leverage or widen the strikes.

Your attitude about options is understandable given the way they've been portrayed to the retail investor. And everybody should think about what's right for them. But most retail investors buying stock, making directional bets, buying netflix at $500 a share, you think that's less risky than buying a $100 debit spread on NFLX with a higher probability of success and massively less capital. And you think that way because it's how you and the retail sector has been conditioned for 20 years.

And, like I said up top here, the retail sector has underperformed the market. And it's not because of evil HFT firms who do nothing but cheapen transaction costs for everybody. It's because of the way we trade. It can be better. Check out this TastyTrade video covering a study they've done on reducing cost basis with covered calls:

http://www.tastytrade.com/tt/shows/market-measures/episodes/...