Are naked puts really this safe????

[segv]

Quote from Eliot Hosewater:

Is this a change? I thought he used to just sell the puts. IIRC he took a severe hit when the market tanked recently.[/B]

Yes, it was a change made last year. Just look at how Max is reaping the profits from delta-hedging short puts on the ES.

 

[Eliot Hosewater]

Quote from segv:

Yes, it was a change made last year. Just look at how Max is reaping the profits from delta-hedging short puts on the ES.

Month Return YTD Assets
Jan -4.50% -4.50% $113,000,000
Feb -1.70% -6.12% $96,000,000
Mar -5.10% -10.91% $93,000,000
Apr 0.85% -10.15% $75,000,000
May 1.05% -9.21% $70,000,000
Jun -0.70% -9.85% $70,000,000
Jul 0.01% -9.84% $55,000,000

 

[beep1]

Quote from optioncoach:

Sounds like a bunch of idiots started a fund. Anyone who thinks naked options are not that risky because you simply buy them back before you incur a large loss knows so little about the markets, it rises to a level of negligence that the SEC should get involved in. Anyone with money in this fund should withdraw and these managers should be fined by the SEC for incorrectly stating the risks of the strategy they are employing.

Amazing the stupidity of some people (referring to the fund managers, not the OP).

This is a stupid post. Calling on SEC to come in! This is what they would do: NO PREMIUM selling for overage Joe. The only area I know of where common people can make their cut, doing what the sell side does (which nothing than just sell and wait).

The idea of selling puts (even the naked) is a money maker, because time and prob is the favor of writer, and because pros do it. Average joe rides their back.

 

[MarkBrown]

fool

Quote from Jahajee:

I have been involved in trading futures and stocks for the past 15 years; I am quite aware of the Futires markets and the potentially huge swings but execpt for very few occassions I have not seen a market where you cannot get a fill with reasonable slippage.

My example was sell 1220 put with SPU8 at 1270; when was the last time there was a one-day decline of 50 S&P points? Tell me, you experts, when was this? What was the biggest gap down in SP futures in recent years?
Hint: put up a daily S&P futures chart and put an ATR indicator so you can see view the average daily ranges; do it for a 10-year period.

We should be more realistic in these discussions, more attuned to actual market movements, and basing our comments and advice on real life situations.

So, I am again reiterating that you can sell SPX puts about 50 points away from current market position and piut a sell stop order a few points above the put strike for protection. You may still lose on a few trades but on most trades you will win IF YOU MANAGE THE TRADE PROPERLY. I do say that you shoudl sell puts and forget about the trade and you will make zillions. Let's be real.

 

[beep1]

Quote from RedDuke:

Hello,

I have a question about naked options, in this particular case – naked puts. I pretty much know nothing about options besides general terminology. I attended a meeting for capital raising for 1 small fund (around 10mil under management). The only thing they trade is options on S&P 500.

The manager said that they utilize various strategies which are very safe and depend on market conditions. The only danger, according to him was the leverage they employing, but let’s set this one aside for now. When I asked him about how they trade, he said that right now they basically sell out of the money naked puts. I immediately asked about the danger of such strategy, we all heard many stories about people loosing everything by trading this way. This is what he said:

They are not risky because you can always cover the one that you sold and sell the following month thus not having a loss. Basically he would sell October Put for $2 and if the price would approach the strike, he would buy back this put for 3 and immediately sell November Put for 3 and thus protecting himself. He did not loose anything except for commissions. It seems like average down, but since this is index it is not as volatile as stock.

What do you guys think? It just sounds weirdly simple. Can you please share your insights.

Thanks,
redduke

This is a good idea! Apply money management from the outside (I assume you understand what the last sentence means). And you will make a lot of money.

 

[Nanook]

Quote from beep1:

This is a good idea! Apply money management from the outside (I assume you understand what the last sentence means). And you will make a lot of money.

Psst! And to make lots more money go ahead and sell the OTM calls, too. Shhh! Let's keep this quiet and to ourselves...

 

[Jahajee]

Quote from MarkBrown:

fool

When you can't respond intelligently then you resort to personal attacks.

Is it a case of shadenfreude by those who fail or cannot make profits selling OTM puts and hedging?

This WAS an intelligent discussion with both sides being ventilated but when some can't deal with the issues they
rant and vent their frustration.

C H I L L.

 

[AAAintheBeltway]

Quote from IV_Trader:

Selling naked premo is the best strategy to trade OTHER ppl money

Lot of truth to that.

 

[El OchoCinco]

Quote from beep1:

This is a stupid post. Calling on SEC to come in! This is what they would do: NO PREMIUM selling for overage Joe. The only area I know of where common people can make their cut, doing what the sell side does (which nothing than just sell and wait).

The idea of selling puts (even the naked) is a money maker, because time and prob is the favor of writer, and because pros do it. Average joe rides their back.

Moron, the SEC should come in when fund managers mistate the risk of their portfolio and tell teh average JOE that selling naked options is not that risky at all because all you have to do is roll to the next month. If you think the SEC has no jurisdiction you are quite wrong because any fund holding themselves out and discussing performance and risks is liable for fraudulent claims or inaccuracies.

Please give me your wisdom how selling options has a higher expectancy or probability over buying them. Wouldn't we all be selling options then and no one would be buying.

 

[AAAintheBeltway]

Quote from austinp:

<i>"This is a group that made >$10MM a year for a decade and lost it all."</i>

short options = inverse risk/reward ratios are much like handling dangerous animals for a living. There are professionals who work with lions, tigers, bears, elephants, etc and have avoided injury for decades. But the trainer must be vigilant of risk at all times, fixated on controlling risk without ever letting guard down. One instance can change everything in an instant. Permanently.

Great analogy.