Are naked puts really this safe????

Quote from optioncoach:

The sillyness continues... You cannot even stop from contradicting yourself.

Naked puts are not safe, and it does not depend. Safe is reserved for treasuries and CDs, not naked options. Can you make money doing it? Sure any strategy can make money but there are no old-timers selling puts for a living, only those with stories about how they blew up after many years of making money.

At a minimum I would advocate put spreads over naked puts which shows a little more respect for the risk.
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Naked puts are not an income strategy, but they're not the antichrist. They should be considered as a method of reducing cost-basis through assignment for the investor or as a spec on a reduction in rates/dividends for the trader. There are better volatility-trades.

Safety is subjective. There can be more risk in a short put than outright shares on vega, as in biotech, but they can be pretty innocuous when traded on large caps. Simply avoid selling stops on index.
 
Quote from MasterAtWork:

Hi Guy990opl,

I respectfully disagree. You've just make little a mistake. The problem is not about probabilities, it's about expectations. You need to put the pay-off in your formula.

If you make 100 times 1$ and once you lose 150$, you finally lose 50$. That's because there is this risk of losing 50$ that you can now seem to make easy money. Don't forget the pay off.

Options are priced a way buyer and seller got the same expectation. That means if you earn money often, one loss is enough to keep the game fair. Hence the loss will be much bigger.

No free lunch.

Regards
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I did say that there is also a big component about money management that is rarely discused by the industry when it comes to selling options. Such part is very very important because very few know and understand how to apply it.

It is also a matter of being consistent. Everyone is able to make money for a few years and give it all back the next. Optioncoatch says there are no old timers who sell options...riiight. He sure knows with a resume of over 6500 posts. Max Ansbacher has been selling options for decades and that's just one player.

One could make $ 1 even 200 or 300 times or more before losing the $ 150, again it depends. It is not either black or white like some of you think it is.

For me it is about probabilities, my job is not about predicting anything, or about questions like is the market going to go up or down ? My job is about doing anything in my power to place trades with high probability of success and selling options is one way to do it. It is not the only way and it is not the best way, but when people assume that is bad a priori, they simply don't know anything about options.

Indeed there is no free lunch never assumed or said there was.
 
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.
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Whatever shitbird.
 
Quote from guy990opl:

I did say that there is also a big component about money management that is rarely discused by the industry when it comes to selling options. It is also a matter of being consistent. Everyone is able to make money a few years and give it all back the next. Optioncoatch says there are no old timers who sells options...riiight he sure knows with a resume of over 6500 posts. Max Ansbacher has been selling options for decades and that's just one player.

One could make $ 1 even 200 or 300 times or more before losing the $ 150, again it depends. It is not like black or white.

For me it is about probabilities, my job is not about predicting anything, you know, my job is not about questions like is the market going to go up or down ? My job about doing anything in my power to place trades with high probability of success and selling options is one way to do it. It is not the only way and it is not the best maybe but when people assume that is bad a priori, they simply don't know anything about options.

Indeed there is no free lunch never assumed or said there was.
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I understand what you mean but the point is naked option selling is a skew game. You can' t base a business on a skew game.

Take no offense, but once again, probability doesn't mean a thing. It doesn't exist. You just can think about eventualities and related payoffs. Eventualities are what we call probability but it's only a way of thinking. Have you ever meet or see a probability? No, you have seen the consequences, the outcomes.
So, you don't know and won't know how many times you will make 1$ before losing 150$ and if after losing 150$, you won't immediately lose another 150$ bet. That's the asymmetry of the game.

Just think about time decay. It can't be a gift, there is obviously a risk linked with.
My opinion is the only way about selling options is to hedge options you already purchased. I may be wrong, so I'm here to learn too.

Honestly, I would like to know one thing: would you write options if there was no theta?

Cheers
 
Quote from opt789:

+1
Nine pages of pointless arguing to debate something that should be obvious to any real trader. There is nothing to prevent a 10% gap down and the VIX going to 150. It may never happen, but not considering that risk in your strategy makes you an insurance salesman with inadequate capital reserves, not a trader.
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WELL SAID!
 
Quote from MarkBrown:

he he he lol rotflol like i said fool... ;)

btw i worked for the worlds largest option seller "the worlds largest"! undisputed!

i know all about selling naked! it's not for people who have blood in their veins. only ice water need apply. i can tell you so many stories no one would ever believe!

mark brown
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Let's hear one or two of those stories.
 
1. Would you die without ever having lived? or
2. Die after living well.

Among those who do not ultimately make it, net premium buyers are similar to case 1, and net premium sellers are in case 2.

Even those who are making it, they are never sure of the time of death, and they are always a candidate for the above two scenarios.

Theory tells us that the above two cases are ultimately the same, but human intuition does not trust it (may be the theory is supposed to be right, but will not right, like financials saved by new shorting rules).

Which type of death would choose, knowing that you are always likely to die (in the option business that is)?

I always thought option 2 is what a smart person should fellow.

And if I have to die, at least I want to be on the side of the insiders (market makers, etc) because they are doing work on my behalf to set a currect cushion (even if that cushion may turn out to be a knife--- at least I will find support in the knowledge that the knife cut my A. and theirs).

Those saying that selling has no advantage, could you answer the above two death questions as they apply to you not as advice to someone else?
 
Quote from MasterAtWork:

I understand what you mean but the point is naked option selling is a skew game. You can' t base a business on a skew game.

Take no offense, but once again, probability doesn't mean a thing. It doesn't exist. You just can think about eventualities and related payoffs. Eventualities are what we call probability but it's only a way of thinking. Have you ever meet or see a probability? No, you have seen the consequences, the outcomes.
So, you don't know and won't know how many times you will make 1$ before losing 150$ and if after losing 150$, you won't immediately lose another 150$ bet. That's the asymmetry of the game.

Just think about time decay. It can't be a gift, there is obviously a risk linked with.
My opinion is the only way about selling options is to hedge options you already purchased. I may be wrong, so I'm here to learn too.

Honestly, I would like to know one thing: would you write options if there was no theta?

Cheers
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"
Just think about time decay. It can't be a gift.."

It is not a gift, but the seller does not need to be as skilled as the buyer to survival without fatal injury, the option rules put the beginner is the toughtest game in the world (second only to a naked option seller).

I have always asked why in the world they do not allow a beginner to start first with spreads!
 
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