CCs and NPs - who to believe?

[Eliot Hosewater]

One book says do some TA and write CCs at resistance and NPs at support.

Another book says look for stocks coming off their 52 week lows to write CCs. Doesn't say too much about NPs even though they are mentioned in the title.

Maybe that proves it doesn't really matter when you write CCs, just pick the right stock.

 

[MTE]

Covered call and naked put are synthetic alternatives. If you don't already own the stock then forget about CCs and write naked puts, it'll save on commissions and slippage.

 

[Eliot Hosewater]

Quote from MTE:

Covered call and naked put are synthetic alternatives. If you don't already own the stock then forget about CCs and write naked puts, it'll save on commissions and slippage.

I know, but what about timing the NP write?

Plus, most brokers won't let you sell NPs in an IRA. Fidelity said they are starting to allow it, but my IRA was only apporved for CCs.

 

[riskarb]

Believe the math. Synthetic refers to fungibility and = greeks. MTE is correct; sell puts if there if no legacy position.

 

[Eliot Hosewater]

I'm not asking about the merits of NPs over CCs.

I'm asking about when to open the position.

I just read two books, and they give conflicting advice (imagine that).

 

[IV_Trader]

Quote from Eliot Hosewater:

I'm not asking about the merits of NPs over CCs.

I'm asking about when to open the position.

I just read two books, and they give conflicting advice (imagine that).

you are mixing two different issues : WHEN and HOW

 

[MTE]

With a naked put you want the stock to stay above the strike so it is a neutral to bullish strategy. Coming off support is a good place to start as the volatility should drop off as the stock rises and thus benefit a short-Vega position.

 

[Eliot Hosewater]

Quote from IV_Trader:

you are mixing two different issues : WHEN and HOW

No, I'm asking WHEN.

THX MTE.

 

[AAAintheBeltway]

The point is, they're the same strategy. So why would you do them at different times? I'd suggest you get another book, hopefully written by someone who understands synthetic equivalents.

 

[Eliot Hosewater]

Quote from AAAintheBeltway:

The point is, they're the same strategy. So why would you do them at different times? I'd suggest you get another book, hopefully written by someone who understands synthetic equivalents.

Well, I agree they are nearly identical. Now how do we get the brokers to agree? Why don't they let you do NPs in an IRA?