Are naked puts really this safe????

chewbacca · Sep 9, 2008

Quote from dagnyt:

I've been complaining about this issue for awhile now, but no one cares. Here's ax example from my blog: http://blog.mdwoptions.com/options_for_rookies/2008/06/warning-about-t.html

The RIGHT to decide disappears at expiration, and any option that finishes ITM is automatically exercised.

The option owner has the OBLIGATION to notify his broker NOT TO EXERCISE if he does not want to take delivery.

Doesn't seem fair, but it's a great benefit to the brokers who charge exercise/assignment fees and then again when the customer covers the unwanted stock position.

These rules are for the broker, but for the investor/trader.

okay so lets say I have a 30k account and i am long 2 ITM GOOG calls.........if at expiration I don't have enough money in the account to buy 200 shares of GOOG at the strike price then what happens?

dagnyt · Sep 9, 2008

Quote from chewbacca:

okay so lets say I have a 30k account and i am long 2 ITM GOOG calls.........if at expiration I don't have enough money in the account to buy 200 shares of GOOG at the strike price then what happens?

1) You buy 200 shares by automatic exercise.

2) You get a margin call

3) You sell the GOOG shares.

Revenue for the broker.

Mark

commiebat · Sep 10, 2008

Quote from chewbacca:

okay so lets say I have a 30k account and i am long 2 ITM GOOG calls.........if at expiration I don't have enough money in the account to buy 200 shares of GOOG at the strike price then what happens?

If they're ITM, sell to close for whatever they're worth.

If they're OTM, instruct your broker not to exercise.

If you do nothing, you expose yourself to a whole weekend of risk for no gain. The thing about pin risk is that GOOG has surprisingly big pins.

El OchoCinco · Sep 10, 2008

^^^^^^^

non-paying sponsor huh...

atticus · Sep 15, 2008

Jahajee on suicide watch, but wtf do I know, as I just went long NDX at 1717.

IV_Trader · Sep 15, 2008

so , what is the answer for OP's question ? Is it (safe) ?

dagnyt · Sep 15, 2008

Quote from IV_Trader:

so , what is the answer for OP's question ? Is it (safe) ?

It's safer than buying stocks.

But, it's certainly not safe.

Mark

crash n burn · Sep 15, 2008

Quote from atticus:

Jahajee on suicide watch, but wtf do I know, as I just went long NDX at 1717.

that's right. you know nothing. arrogance and ignorance go hand in hand. so STFU and move on.

EDIT.: Jahajee called me a while back to let me know that she made a fortune with naked calls on leh over the weekend. another genius.

newguy05 · Sep 15, 2008

Quote from crash n burn:

that's right. you know nothing. arrogance and ignorance go hand in hand. so STFU and move on.

EDIT.: Jahajee called me a while back to let me know that she made a fortune with naked calls on leh over the weekend. another genius.

hi jahajee

JSHINV · Sep 15, 2008

I haven't been on ET in a couple of weeks. But, in light of today's events, I thought I'd stop by this thread. I was wondering are those who were proponents of naked put sales, are you still proponents? Or even covered calls or cash secured puts? Don't get me wrong I love options. Use them all the time to hedge the underlying. Which for a trader like me they are best used for. Oh, I know what popular literature says, that covered calls are hedges. Not in my book.