Are naked puts really this safe????

[college_trad3r]

selling naked puts is like arbitrage or madoff ponzi scheme.

steady returns, then blow-up.

best business model for a hedgefund manager though

investors like steady returns, even though the strategy will eventually blow up

 

[shortie]

how are the traders (not engaged in selling naked puts) who produce excessive returns year over year different those who only sell naked puts?

i strongly suspect that the end result is the same - a blowup.

 

[chrismontez]

So do most of you responding to this thread take a position and just leave it without adjustment as the market changes?

I would think most institutional traders protect their naked put positions with short stock positions that still allow them to make money off the premium.

Even for a retail trader, if you took a company like IBM that you can sell 2011 70sp puts that are $35 OTM for $365, would you just watch your position bust if it dropped that low or start shorting the stock if it got down near there?

 

[oraclewizard77]

I was a little bored so reading this thread, and noticed that someone mentioned that Max, a pro, has been doing this for years and making money, so I guess it shows even if you are one of the best, eventually, this strategy by itself causes wipe out. This is from http://www.autumngold.com/Advisor/Statistics/cta_profile.php?id=9



Principal Max G. Ansbacher
Trading Strategy Option Writer / Stock Indexes
2008
2007
2006
2005
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
Aug 1.38% -8.59% $55,000,000
Sep -27.95% -34.14% $40,000,000
Oct -11.85% -41.95% $20,000,000
Nov 0.62% -41.59% $18,000,000
Dec 2.54% -40.10% $14,000,000

 

[Wayne Gibbous]

Quote from oraclewizard77:

I was a little bored so reading this thread, and noticed that someone mentioned that Max, a pro, has been doing this for years and making money,

Interesting. I've heard about this guy for years. First time I've seen numbers. He does okay, but almost lost it last year and he has big drawdowns most years. I like my strategies better...

Annual Performance Since

Year Annual Compounded ROR MaximumAnnualDrawdown
2009 8.56% -4.42%
2008 -40.10% -41.95%
2007 5.10% -2.28%
2006 7.55% -0.59%
2005 11.09% -1.33%
2004 21.68% -0.25%
2003 22.50% 0.00%
2002 -0.20% --22.79%
2001 18.41% --20.16%
2000 -4.38% --25.95%
1999 23.47% -9.67%
1998 23.72% --16.76%

 

[dagnyt]

Quote from chrismontez:

So do most of you responding to this thread take a position and just leave it without adjustment as the market changes?

The beauty of trading options is the ability to manage specific risk. If you are not going to do that - if anyone's strategy is to open a position (place the bet) and hold through expiration without adjusting, then you are gambling. There is no other wrod tod ecribe it.

The approximate probability of success is know - in advance. But sometimes (naked puts) the possible loss remains a mystery.

If you adjust, you trade options and have a strategy.

If you blindly hold, you gamble.

Mark

 

[oraclewizard77]

I think if you write a naked put as in 1 put on a stock you would normally want to buy 100 shares at market, you are pretty safe.

Also, lets say you really really want to buy the stock, write 1 naked put, and then buy 100 shares instead of buying 200 shares.

Also, same thing for shorting. Lets say you think a stock is like a washington mutual. Sell 1 naked call on it and then short 100 shares.

I bought CEO at $ 90, wrote a covered call on it for $ 130, the stock runs up to $ 144, then shoots down to $ 120 after expiration which is what I sold it for. Of course next day it goes up 4 points, but I did not want to give back another 20 points of profit. However, if I sold that call naked, at one time it was 5 times more expensive than what I sold it for, so if anyone did high leverage on margin they may have gotten killed even though the option at the end became worthless.

 

[Hari Seldon]

Is selling naked calls on SPX wtf otm safer than selling naked puts on SPX wtf otm? Say 7-10 days out? Delta .05?

Seems like it would be.

Comments please.

 

[xandman]

Is selling naked calls on SPX wtf otm safer than selling naked puts on SPX wtf otm? Say 7-10 days out? Delta .05?

Seems like it would be.

Comments please.

Yes. That's why that section of the skew has the lowest volatility.

Being priced in and very capital intensive, you would do no better than holding the index on a cash basis with less hassle.

 

[Hari Seldon]

Yes. That's why that section of the skew has the lowest volatility.

Being priced in and very capital intensive, you would do no better than holding the index on a cash basis with less hassle.

I appreciate the reply!

Not sure what you are telling me. I don't want to hold the index. And quite frankly, I am just trying to make 1k to 1.5k a month which I know is not efficient roi wise but I don't care.

Thank you for answering my question.