How do holds work when selling naked options?
- Thread starter TWORIP
- Start date
Bud,
You did mention it earlier, but I responded you your question, Bud, when you asked if anyone has ever seen STOCK do that, Bud.
Bud, you may be SURE that a 20% drop would be followed by an up day, but you don't remember Oct 1987 when bids were essentially non-existent the morning after the >20% drop. The world as we know it almost ceased to exist.
But, as long Bud's <i>sure</i> I guess we should all feel so much better.
Mark
I don't think you like being called bud. So i shall call you Dag.
Dag,
October 19th 1987 the market dropped 22% and closed at 1739, then closed the next day oct 20th at 1850.
I don't know how you do your math, Dag, but to me that's up.
If you had 1000 spy and 80 put open, and it dropped 20% right at strike, you're losing 16. You're still only down 16k minus what is offset by the income from the put and call sales. About an 11% max loss in that situation, and i think i can live with that risk, being it is not likely to happen. I am also assuming this 20% loss takes place once strike is hit. The loss would be even smaller depending on the price and if it was above strike. I am also assuming you BTC the position at the peak of the crash on that day. Maybe you BTC after market has lost 10%. Then you're down like 5%.
Dag,
any more unrealistic cracks for my strategy using the spy and qqqq?
OSIP MAY 2004. Pull up a chart if you don't think shit can hit the fan. And your basing your assumption on the fact that you wouldn't get margin called right at the bottom/top AND there are bid/offers to hit. Plenty of people have already outlined the main pitfall of this strat, you can choose to take that advice or ignore it. Either way, you believe in your assumptions so much, so go right ahead and trade it. Let us know how you do, and when you blow up.
First off i have been trading this strategy averaging 5% or more per month through one of the worst markets ever and have had none of these problems mentioned, which i have covered in detail.
Second, I would not get margin called because i am cash secured.
And third, OSIP is a stock and we're talking about the spy and qqqq this whole thread except for one little slip of mouth in one post which i rectified my very next post after it. Read the whole thread before you decide to come out of the peanut gallery with the rest of them. Show me once where the spy or qqqq has had a 20 point drop in one day or a 10% gap over night??
Oh and please do point out the main pitfall in my strategy, i must of missed it while i was covering all the other rediculous scenarios...and i did cover them.
I'll wait....
TWORIP,
Sorry if I missed it because I didn't read this whole thread in detail, but I thought you said you were trying for portfolio margin - and if you are selling naked calls, how can you be cash secured? I understand cash secured puts, but is it possible to be cash secured for uncovered calls? Sorry, I don't know as I never traded uncovered calls.
Just to ask as well, I wonder if you would at least consider buying way out of the money puts and calls as extreme protection - that would basically make what you are doing a Long Iron Condor (if I understand this thread correctly). And, even though you would have a pay a small amount for the calls and puts, it could possibly lower your requirements and certainly you might be happy to have way out of the money protection one day if the market ever does massively gap while you do this.
Not trying to criticize - just curious.
JJacksET4
There are a LOT of things you could do...but it is obvious that you don't have the resourses to do them, given your youth. The biggest problem is having enough resourses (MONEY) to cover your butt when the going gets rough. Even HF's with far more money than you will ever see have been bankrupted due to margin calls. Margin can double or triple and there goes all your calculations. the REAL world of trading is a very different animal than the VIRTUAL world.
edit forgot your cash secured
yep good luck