Is there a way to set a stop loss when writing naked options
- Thread starter lasner
- Start date
Lasner,
Writing naked options isnât recommended unless you have very, very deep pockets and donât mind an occasional massive loss (just ask Mark Cook). Having said that, it is your money so the only thing I would recommend to contain a loss is to buy an option above (if selling calls) the strike price of your naked options (thus they arenât naked but you get the point). How far above it based entirely on your risk tolerance and how much pain you can endure. This will protect you from a monster move up for whatever reason. The farther away from the current price, the less you will pay in premium for your protection but the more risk you bear. Pick your position tolerance. Not sure that is what you want to do but that is what I would do if writing options.
Best of luck
TM
Writing naked options isnât recommended unless you have very, very deep pockets and donât mind an occasional massive loss (just ask Mark Cook). Having said that, it is your money so the only thing I would recommend to contain a loss is to buy an option above (if selling calls) the strike price of your naked options (thus they arenât naked but you get the point). How far above it based entirely on your risk tolerance and how much pain you can endure. This will protect you from a monster move up for whatever reason. The farther away from the current price, the less you will pay in premium for your protection but the more risk you bear. Pick your position tolerance. Not sure that is what you want to do but that is what I would do if writing options.
Best of luck
TM
You could get this effect by placing, for example on a naked call, a buy order on the underlying that triggers at the stop effective stop you wanted. This would limit your loss much like the stop you wanted. You would need to adjust or close out these positions manually though. (You'd also need enough capital in the account to create the position.)
