A Fortune in Selling Naked Call Options (w/Martingale)

Quote from jones247:

I would only sell calls on indices or mega cap stocks...
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Another LOL!

Like a index or a mega cap stock can't continue higher?

In my years of trading I can point to a few things that I know to be true with great certainty.

One of them is that just because something is "high", is no reason why it won't go higher...and keep going higher.

I've got nothing against shorting. I do it 10 times a day. (Love this market!) But naked calls is not the way to play that game.
 
Quote from jones247:
I fully expect the index or stock to go higher; however, I don't expect it to go 30% higher in a 30 - 60 day period.
Walt
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  • QQQQ current price $45.50.
  • QQQQ Mar 2008 47 calls @ $1.62.
  • QQQQ Mar 2008 50 calls @ $0.69.
  • QQQQ Mar 2008 55 calls @ $0.08.
  • To get a decent premium you would have to go about 5% OTM with the QQQQ Mar 2008 47 calls @ $1.62.
 
I would be more prone to selling a $46 call for $1.50 with a Feb expir. Although it's currently trading at $1.30, I would set my limit order and wait... patience.

Walt
 
i lost 30 k in one week selling naked calls, for a 24 yr oldf broke real estate agent it hurt. If you have the cash to make the margin calls then by all means do it
 
Quote from jones247:

I would be more prone to selling a $46 call for $1.50 with a Feb expir. Although it's currently trading at $1.30, I would set my limit order and wait... patience.

Walt
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The problem with the limit order is that the QQQQ has to move AGAINST you to get filled. If the QQQQ trades how you want - flat, down or slightly up - then you don't get filled.

For the record we will do a paper trade and see how it does. And no adjusting the premium if the QQQQ rallies and cherry picking entries: Sell QQQQ Feb 2008 46.0000 call @ $1.30
 
We went close to 30% in 60 days back 1998, following the crash. For the sake or argument, let's say traders, or option writers, got more bearish when the market went to a lower low. They would have gotten smoked if they were naked. The most compelling part against your strategy is, even if you waited for a 10 or 20% bounce it still wouldn't have worked because the market never even looked back.

Before you develop any strategy you first gotta go to the "Anything can happen" University. You can't fully appreciate the power of the market until you understand those three little words. They are just words to live by.

Quote from jones247:

I fully expect the index or stock to go higher; however, I don't expect it to go 30% higher in a 30 - 60 day period.

Walt
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Quote from jones247:

The common belief that selling options, especially calls, is VERY RISKY is a "red herrin".
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You gotta help me out here. Do you mean "red herron" or "red herring"? Means two different things entirely. :confused:
 
Quote from FCostella:

You gotta help me out here. Do you mean "red herron" or "red herring"? Means two different things entirely. :confused:
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sorry... I misspelled the term.

This the definition of a "red herring"...
A red herring is a metaphor for a diversion or distraction from an original objective. Red herring may also refer to:. Kipper, a fish having been dried, ...
en.wikipedia.org/wiki/Red_herring - 15k - Cached - Similar pages
 
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