Are naked puts really this safe????

Quote from dagnyt:

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2) A covered call is exactly equivalent to a cash-secured naked put, when the strike prices and expiration date are the same.

3) Naked put sales (cash-secured or otherwise) are still okay. But they should be used ONLY by investors who WANT to accumulate stocks at prices lower than current.

...
Mark
http://blog.mdwoptions.com/options_for_rookies/
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Hi Mark,

Since you seems to give helpful and useful advices, just my two cents. (I think it's what you thought but didn't write :) )

A covered call can be seen as a naked put only for european style options. Be careful with indexes and stocks.

Since one can't know when american puts or calls with the same strike and the same expiration date would be exercized, they can't be held as if they got same maturity. Call put parity holds no more and inequality we get then is something quite different.

Regards
 
Quote from MasterAtWork:

Hi Mark,

Since you seems to give helpful and useful advices, just my two cents. (I think it's what you thought but didn't write :) )

A covered call can be seen as a naked put only for european style options. Be careful with indexes and stocks.

Since one can't know when american puts or calls with the same strike and the same expiration date would be exercized, they can't be held as if they got same maturity. Call put parity holds no more and inequality we get then is something quite different.

Regards
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CC and NP are the same, regardless of whether the option is American or European.

Being assigned early is NOT a burden. It is nothing to fear, and in fact is often an advantage. BIG EXCEPTION: cash-settled American style options (OEX). It's not a good idea ever to be short those options.

Many times (but not always), when assigned early, you can either

a) buy back the stock and sell the same call with some remaining time premium or

b) sell the stock and sell the same put with residual time premium

If there is nothing appealing to trade, and if the cost to hold the position is a factor, then the position can simply be closed.


But the basic premise: CC = NP (cash-secured) is true.

If there's a dividend involved, there are other considerations, but when priced correctly, the two are still equivalent.

Thank you.

Mark
 
Quote from dagnyt:

CC and NP are the same, regardless of whether the option is American or European.

Being assigned early is NOT a burden. It is nothing to fear, and in fact is often an advantage. BIG EXCEPTION: cash-settled American style options (OEX). It's not a good idea ever to be short those options.

Many times (but not always), when assigned early, you can either

a) buy back the stock and sell the same call with some remaining time premium or

b) sell the stock and sell the same put with residual time premium

If there is nothing appealing to trade, and if the cost to hold the position is a factor, then the position can simply be closed.


But the basic premise: CC = NP (cash-secured) is true.

If there's a dividend involved, there are other considerations, but when priced correctly, the two are still equivalent.

Thank you.

Mark
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Sorry Mark but since maturity can be different for call and put same strike same expiration date, parity doesn't hold.
If parity doesn't hold, implied volty won't be strictly the same for put and call.But would move in a range.
It doesn't mean that risk are higher for CC or NP, just prices can be quite different.

I can write the maths if you want but I thought it was something you already knew.

Check it out and I'm sure you will agree.
 
Quote from atticus:

Jahajee's alter-ego, crash n burn, is due any moment with his private insights into Jahajee's massive winners.
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I enjoyed that episode of SEINFELD where Elaine was bitter and even envious of George getting married and she confided in the rabbi ... of course, the rabbi could not keep it in the vault and pretty soon all were aware of Elaine's bitterness.... I don't know why I remembered that scene .... but...

Now, SERIOUSLY, does anyone really believe the markets will revisit today's low anytime soon? SP Futures is now at 1220, almost 60 points from the low today! That's a big range day, a key reversal day, about 5% from the daily low!

And, 220 SPX points away from my SPX 1000 puts. But, just to suppress the fear and angst I will buy SPX 1050 or even 1100 puts tomorrow or during the week. Yes, the markets will rally into expiration but will soon retrace and give up most of the gains. I expect to sell some calls on any move above SPX 1280.
But, I don't see us going below 1160 during the next two weeks or so. I have been wrong many times before but fewer times when I was right.

Don't take it personally.
 
Quote from Jahajee:

Don't take it personally.
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Don't take it personally, but it's a lose-lose for Jahajee. Either the hindsight-trades are moronic paper-trades, or you're actually committing funds to this exercise in idiocy. Obviously it's best to admit they are fictional.
 
How about the following strat?
Selling ATM put and shorting the underlying, when one expects the price to fall nicely over the next 6 weeks?
The idea is to collect on the premium very safely. Right now, the premium for 1220 put is 38 with ES at 1220, so the max gain will be limited to 38 less cost and the max loss to cost if any, or NOT?
the above is a question and not a claim.

p.s.
if the price rallies 30 points, to exit both and possibly lose a little.
 
Quote from ML_QUANT:

How about the following strat?
Selling ATM put and shorting the underlying, when one expects the price to fall nicely over the next 6 weeks?
The idea is to collect on the premium very safely. Right now, the premium for 1220 put is 38 with ES at 1220, so the max gain will be limited to 38 less cost and the max loss to cost if any, or NOT?
the above is a question and not a claim.
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It's a synthetic short call.
 
Quote from ML_QUANT:

How do u calculate the time decay?
I just put in an offer at 41 with ES at 1220 and I expect 1175 to be hit shortly.
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Compute the theta on the Sep 1220 call.
 
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