<<< For the covered call sellers. I know its another popular strategy, buy/write but as you know this has the same risk as selling puts naked. This is another strategy that can wipe you out in a bear market. >>>
It isn't stock dropping that wipes investors out in a bear market.
it's being over leveraged that does that.
A credit spread may be considered a hedged position, but if you over leverage them, they can wipe you out quicker than selling puts naked, as you can potentially use more leverage with spreads than selling puts naked. (And most spread investors do)
I would never recommend anyone enter the market naked. But it's excessive leverage that kills them, not being naked. Particularly if you are over leveraged with a pending expiration date of a spread hanging over you.
The other thing that kills investors more than being naked, is not being "picky" about "price selection".
Buying stocks high, because the "current story" is good, and you feel protected (hedged), so you buy higher than you normally might.
Bottom line,.... being hedged can cause investors to over leverage and buy high. And combined with a looming option expiration date, that is a recipe for disaster.
However, being naked is also a recipe for disaster, if you over leverage and buy high.
But because you are not hedged, chances are you will not be on as much leverage, and not buy as high via a naked put, as someone who feels that false sense of security of being protected in a spread.
Hence the reason I discussed buy/write as a potential strategy to consider. You are unlikely to over leverage,... you are unlikely to buy high since you get to select your otm price, and you are putting up the cash upfront. And if the stock is down on expiration day, you can consider buying and waiting for a recovery,... while you sell calls and/or collect dividends.
You don't need to fear the ticking clock of option expiration day looming.
TIME, is not as big a concern to a buy/write investor, as it is for a hedged, but over leveraged spread investor, who may have bought at a higher price than he normally would have, because he was hedged and felt protected.
I'll point to DanShirley as an example.
It isn't stock dropping that wipes investors out in a bear market.
it's being over leveraged that does that.
A credit spread may be considered a hedged position, but if you over leverage them, they can wipe you out quicker than selling puts naked, as you can potentially use more leverage with spreads than selling puts naked. (And most spread investors do)
I would never recommend anyone enter the market naked. But it's excessive leverage that kills them, not being naked. Particularly if you are over leveraged with a pending expiration date of a spread hanging over you.
The other thing that kills investors more than being naked, is not being "picky" about "price selection".
Buying stocks high, because the "current story" is good, and you feel protected (hedged), so you buy higher than you normally might.
Bottom line,.... being hedged can cause investors to over leverage and buy high. And combined with a looming option expiration date, that is a recipe for disaster.
However, being naked is also a recipe for disaster, if you over leverage and buy high.
But because you are not hedged, chances are you will not be on as much leverage, and not buy as high via a naked put, as someone who feels that false sense of security of being protected in a spread.
Hence the reason I discussed buy/write as a potential strategy to consider. You are unlikely to over leverage,... you are unlikely to buy high since you get to select your otm price, and you are putting up the cash upfront. And if the stock is down on expiration day, you can consider buying and waiting for a recovery,... while you sell calls and/or collect dividends.
You don't need to fear the ticking clock of option expiration day looming.
TIME, is not as big a concern to a buy/write investor, as it is for a hedged, but over leveraged spread investor, who may have bought at a higher price than he normally would have, because he was hedged and felt protected.
I'll point to DanShirley as an example.
