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

[chrismontez]

I thought selling naked calls with high IV was a good thing once so sold a bunch of calls on tasr when it was a high flyer but on a dive . I sold calls that were $5 OTM, and to make it worth my while on the premium I sold calls 6 mos out. Not a good Idea. But instead of taking a loss when it took off, I bought the stock when it hit my strike price so when it got called away I still made some $ on the premium.

 

[jones247]

Quote from scriabinop23:

well you've taken your big loss now. within a short time, the mkt should reward the volatility seller...

the casino doesn't quit on his first big loss.. he stays in the game.

Thanks scriabinop... hopefully, I not like the Trump casinos, they're taking a hammering right now I understand.

Walt

 

[jones247]

Quote from chrismontez:

I thought selling naked calls with high IV was a good thing once so sold a bunch of calls on tasr when it was a high flyer but on a dive . I sold calls that were $5 OTM, and to make it worth my while on the premium I sold calls 6 mos out. Not a good Idea. But instead of taking a loss when it took off, I bought the stock when it hit my strike price so when it got called away I still made some $ on the premium.

I suppose that's in effect a synthetic CC approach... seems reasonable if it's a stock you believe in...

Walt

 

[chrismontez]

I call it covering my behind on a bad trade. But at least by collecting $300 premium on each call I had an $8 swing to the upside before I would have to buy the stock to break even. By buying the stock when it hit the strike price, I could still use the $300 premium to buy puts and set up a synthetic short to keep me even on the trade if the stock started to tank again.

 

[commiebat]

Quote from mihalich:

At least, sell straddles - with the same reward you'll cut the risk twice as the market will go against you only in one direction.

Yes, but you're exposed in both directions, which means that the market is twice as likely to go somewhere that will lose you money.

 

[mihalich]

Quote from commiebat:

Yes, but you're exposed in both directions, which means that the market is twice as likely to go somewhere that will lose you money.

In case of short straddle you could not have both options ITM at expiration - at least you'll stay with one premium in the pocket and one short ITM option if market will be moving fast and you'll not make follow-up actions.
with calls (puts) only you'll likely to stay with twice as much naked calls (puts) ITM - and same premium.

 

[murray t turtle]

Quote from FullyArticulate:

This is spooky. "Megacaps" tend to be momentum plays. Selling a call after a 10% up move is only asking for trouble (Look at that MO chart as an example). One other thought--big up moves (especially after earnings) typically cause volatility to get crushed. You'll be selling volatility at probably the worst possible time.

But, you don't have to convince us, try it out for yourself.

============================
And while 30% a month does seem to be a reasonble probability of max move up;
QQQQ, MSFT, RIMM ,CFC,have hit 30% /close to it ,up in one one month, peak to valley or open to close in one month

Or it could exceed that 30% in the future;
especially since i got those 4 off the top of my head;
not really searching. Be cool , be careful;wisdom is profitable to direct

 

[robbie380]

jones...what is your point with this thread? what is stopping you from trading this strategy? if you think it is excellent then go for it.

 

[FCostella]

Quote from commiebat:

Yes, but you're exposed in both directions, which means that the market is twice as likely to go somewhere that will lose you money.

Hey, man, don't confuse me with no damn facts!

 

[chrismontez]

There always seem to be a lot of people on this board who throw out opinions as if it was truth. Selling naked calls carries a risk that is measurable. Pick your stock, go back and look at the price of the stock on every expiration Friday for the last 10 years, see how much it usually changes between expirations, come up with a chart of how many times ( if any ) your calls would have expired ITM above the premium, look at existing market decisions vs previous conditions and make an intelligent decision whether the risk is acceptable to you for the reward.

My personal opinion is that it is a good strategy for the large firms with big pockets, but the small smuck like most of us is better off being being very choosy and shorting a stock that is starting to tank. The potential reward is much higher with similiar amount of risk.