Are naked puts really this safe????

[dagnyt]

Quote from RedDuke:

Hello,

I have a question about naked options,

What do you guys think?

Thanks,
redduke

This is the classic bull market strategy that kills. It will not work over the long-term.

1) Sometimes markets gap lower and, as already mentioned, it's not always possible to buy back the options for any price near the price at which you sold it.

2) Rolling to the next month does not mean 'no loss.' It means risk is present for an additional 4-5 weeks. And part of the time, the market tanks further - increasing losses. You cannot roll out to the next month forever.

3) "not risky." that's some quote. He will not be managing other people's money for very long - unless he has extraordinary talent as a market timer and stock picker.

4) the kiss of death. he not only uses this risky strategy exclusively, he uses leverage. Not smart.

I don't want to knock the practice of writing naked puts. I've written three option books and recommend that strategy. But, ONLY for investors who WANT TO BUY stock at prices currently below market. Not for anyone else.

Mark

 

[riskfreetrading]

Quote from dagnyt:

I've written three option books and recommend that strategy. But, ONLY for investors who WANT TO BUY stock at prices currently below market. Not for anyone else.

Mark

Could I ask you a question? How come you wrote three books and yet you flancked answering the question of calculating the ITM prob. of a condor?

 

[JohnGreen]

riskfree-- you've never made a mistake?
Give Mark a break. In the next post on that thread, he humbly admits that he was wrong, which tells me that he is a pretty good guy, and probably does very well trading to boot.

I've read every single post that Mark has made on the SPX credit trader thread (one of the best on ET). He comes across as williing to learn, quite knowledgeable and personable (and no, I'm not related to him in any way). Just because a person makes one mistake, don't write off everything they have to say.

I've made mistakes, even in entering orders occasionally, and that does not mean that I'm losing money. On the contrary, those who can admit they have made a mistake quickly can usually avoid real disasters both in life and in the markets.

By the way, Mark's comments above are completely correct. I'm sure that Atticus, coach, dmo, and others who are experienced will trade these types of positions in modest quantities occasionally, but we understand the risk of what we are doing, and never expose ourselves to complete blowout potential. I'm often short premium, but rarely totally naked, and NEVER with my whole account.

 

[RedDuke]

Quote from dagnyt:

... I don't want to knock the practice of writing naked puts. I've written three option books and recommend that strategy. ...
Mark

Hi Mark,

Can you please provide the link to your books.

Thanks,
redduke

 

[AmbushHillbilly]

Quote from RedDuke:

Hi Mark,

Can you please provide the link to your books.

Thanks,
redduke

Not Mark here, but...

http://www.amazon.com/s/ref=nb_ss_b?url=search-alias=stripbooks&field-keywords="Mark+D.+Wolfinger"

 

[Jahajee]

Several possibilities for option trading today - looking to sell SPX calls, and possibly closing 1150 puts.
But I will fade this market - scalping SPU8 shorts, over the next day or so

 

[dagnyt]

Quote from riskfreetrading:

Could I ask you a question? How come you wrote three books and yet you flancked answering the question of calculating the ITM prob. of a condor?

The truth is I got careless. I did not recognize the difference between events are are independent (flipping a coin repeatedly) and events that are mutually exclusive (coin landing on heads and tails at the same time).

I calculated the probability of a 30 delta option finishing out of the money in each of two <i>consecutive</i> months vs. two 30 delta options (call and put) - each finishing OTM during the <i>same</i> month.

Mark

 

[Jahajee]

Quote from Jahajee:

Several possibilities for option trading today - looking to sell SPX calls, and possibly closing 1150 puts.
But I will fade this market - scalping SPU8 shorts, over the next day or so

Sold 25 1125 SEP SPX puts to close this position.

 

[dagnyt]

Quote from AmbushHillbilly:

Not Mark here, but...

Thanks for providing the link.

Mark

 

[chewbacca]

Quote from Wayne Gibbous:

Actually, it can happen. Guy on this board was long a bunch of (previously) OTM GOOG calls, on a small acnt. GOOG gapped up at close on expiry and he was auto-exercised.

Of course GOOG dropped Monday when he was liquidated. He got smoked and ended with a neg acnt balance. IB sucked dry his other acnts to pay.

Yeah he was careless, but options are not for newbs - long, or short...

this sounds like BS

an option buyer has the RIGHT NOT THE OBLIGATION to take deliverily of the underlying on an ITM option at expiration..........so how the hell could he have gotten auto-delivery unless he notified his broker beforehand.......he is not obligated to take deliver of underlying.