"Could you give more info? Did you enter this trade?"
No. This is in response to Put_master selling Nov $10 puts for .25
No. This is in response to Put_master selling Nov $10 puts for .25
My OPTION TRADES..... part 2
- Thread starter Put_Master
- Start date
Quote from Dolemite:
<<< QQQ Oct. 68 put can be sold for 1.76 the 68/65 bull put spread can be sold for .89 which is over half the value of going naked. >>>
So you would earn about half as much as the naked put seller in the same unit of time.
The issue is NOT which is a better strategy.
The issue is selecting the best strategy for a particular stock, a particular price, a particular risk/reward, a particular goal, ect....
If you are investing in over valued stocks, or ones near an earnings date, or those that are super volatile, or financially over debted, or you don't want to even consider the possibility of owning them,.... then spreads is the way to go.
But if you don't mind owning a stock for a period of time, because it's a reasonable price, and you've done your research, then there is nothing wrong with selling naked puts.
In either case, it's important to evaluate the amount of leverage you may be using.
Those are the critical issues. That being, strike price selection and amount of leverage used.
Strategy is merely an issue of preference.
<<< After AAPL dropped from earnings if you sold a 570 naked call and I sold 10 570-575 bear call spreads who do you think would be better off today? >>>
You've changed the discussuion from naked put to naked calls.
<<< QQQ Oct. 68 put can be sold for 1.76 the 68/65 bull put spread can be sold for .89 which is over half the value of going naked. >>>
So you would earn about half as much as the naked put seller in the same unit of time.
The issue is NOT which is a better strategy.
The issue is selecting the best strategy for a particular stock, a particular price, a particular risk/reward, a particular goal, ect....
If you are investing in over valued stocks, or ones near an earnings date, or those that are super volatile, or financially over debted, or you don't want to even consider the possibility of owning them,.... then spreads is the way to go.
But if you don't mind owning a stock for a period of time, because it's a reasonable price, and you've done your research, then there is nothing wrong with selling naked puts.
In either case, it's important to evaluate the amount of leverage you may be using.
Those are the critical issues. That being, strike price selection and amount of leverage used.
Strategy is merely an issue of preference.
<<< After AAPL dropped from earnings if you sold a 570 naked call and I sold 10 570-575 bear call spreads who do you think would be better off today? >>>
You've changed the discussuion from naked put to naked calls.
Dan, I wrote a reply to your ATTENTION ATTENTION ATTENTION post.
Unfortunately I accidentally erased it.
I'll re-write it at a later date when i have time, as it was rather lengthy. Much to respond to.
But thanks for your detailed respose.
Unfortunately I accidentally erased it.
I'll re-write it at a later date when i have time, as it was rather lengthy. Much to respond to.
But thanks for your detailed respose.
With Firefox you can Edit > Undo and that will undo any accidental deletion, or compose you messages in Notepad. It's good to see that you two are now buddies, that is very sweat.
We agree that there is no one strategy that can be put on blindly. However, whether it is puts or calls adding a long option somewhere to protect your trade is the best thing you can do if you want to be successful over the long haul. Replace the AAPL naked call with a PCLN naked put a few weeks back and you get the same results. You mentioned the flash crash in one of your threads. I can tell you from personal experience that I watched a short naked option jump from a value of $8 to over $38 in a matter of 20 seconds. What saved me is that I had a bunch of cheap long puts as insurance that exploded in value. No one says that doing a spread means you have to use one strike away from the long. Sell less and go further out for your long. One day there will be a situation where you are glad you owned it.
You can't call an earnings related move a "flash crash". Flash crash is unexpected, while an earnings related move is expected - especially on a stock like PCLN.
Quote from diaoptions:
You can't call an earnings related move a "flash crash". Flash crash is unexpected, while an earnings related move is expected - especially on a stock like PCLN.
I wasn't comparing an earnings move to a flash crash. I was giving an example of how quickly a naked option can inflate in price, especially on the down side where both the move and the volatility hit you at the same time. The specific move wasn't the point. Having a long option for protection against unexpected moves was.
<<< Put_master does naked short puts, so the risk of being put is something he continually has to consider. >>>
If the stock trades a penny under our strike, we BOTH have to consider the possibility of the stock being put to us "equally".
And just like you, I do not have to keep the stock. I also can sell it immediately, just like you.
The only difference is, I can "consider" the possibility of keeping the stock a short while. The spread trader can not. I have a CHOICE. You do not.
If a stock is just a few pennies under my strike, I like having that choice.
I don't agree that having "no choice" is any kind of benefit. That lack of choice is actually more like a threat than benefit.
<<< I do bull put spreads.... with the intent of never ever being put or even letting myself get into the position of being put... but if I AM put my broker would immediately sell the stock and the margin problem is nill. >>>
Intent is irrelevant. I also don't "intend" to own any stocks.
But depending on the circumstance, I at least have the ability to consider it.
The only way you can NEVER put yourself in a position of being put the stock, is to NEVER let it drop even a penny under your strike.
Which makes your deep OTM safety cushion, not really as deep nor as safe as you think it is.
You gave up a lot of credit premium for that extra safety.... which you can not even risk coming close to.
The margin problem is not "nil".
The margin problem is not only the reason you are being FORCED to sell, but the reason you are FORCED to sell early.
And it is the reason you have NO CHOICE but to sell, regardless of your "intent".
And that "nil" margin issue, is the reason you have little control over how large a loss you may incur, when being forced to sell.
As for your broker immediately selling the stock if it were put to you,.... he is NOT doing that as a favor to you. He is doing it because he is FORCED to.
He is immediately selling to protect his company. Not you!
Nor is he interested in getting you the best price. You get the "fastest" price he can dump it for.
And this is all because of the excessive leverage most spread traders don't even realize they are on.
I'm glad you now realize it, as that is the essense of what I have been trying to warn you and others about.
I'm not saying don't use spreads or don't use leverage. Just be aware that a credit spread trader can easily leverage 10 times the value of their account.... and not even be aware of it.
A $100,000, account can easily control over a million dollars worth of stock via spreads.
To be continued in the am.....
If the stock trades a penny under our strike, we BOTH have to consider the possibility of the stock being put to us "equally".
And just like you, I do not have to keep the stock. I also can sell it immediately, just like you.
The only difference is, I can "consider" the possibility of keeping the stock a short while. The spread trader can not. I have a CHOICE. You do not.
If a stock is just a few pennies under my strike, I like having that choice.
I don't agree that having "no choice" is any kind of benefit. That lack of choice is actually more like a threat than benefit.
<<< I do bull put spreads.... with the intent of never ever being put or even letting myself get into the position of being put... but if I AM put my broker would immediately sell the stock and the margin problem is nill. >>>
Intent is irrelevant. I also don't "intend" to own any stocks.
But depending on the circumstance, I at least have the ability to consider it.
The only way you can NEVER put yourself in a position of being put the stock, is to NEVER let it drop even a penny under your strike.
Which makes your deep OTM safety cushion, not really as deep nor as safe as you think it is.
You gave up a lot of credit premium for that extra safety.... which you can not even risk coming close to.
The margin problem is not "nil".
The margin problem is not only the reason you are being FORCED to sell, but the reason you are FORCED to sell early.
And it is the reason you have NO CHOICE but to sell, regardless of your "intent".
And that "nil" margin issue, is the reason you have little control over how large a loss you may incur, when being forced to sell.
As for your broker immediately selling the stock if it were put to you,.... he is NOT doing that as a favor to you. He is doing it because he is FORCED to.
He is immediately selling to protect his company. Not you!
Nor is he interested in getting you the best price. You get the "fastest" price he can dump it for.
And this is all because of the excessive leverage most spread traders don't even realize they are on.
I'm glad you now realize it, as that is the essense of what I have been trying to warn you and others about.
I'm not saying don't use spreads or don't use leverage. Just be aware that a credit spread trader can easily leverage 10 times the value of their account.... and not even be aware of it.
A $100,000, account can easily control over a million dollars worth of stock via spreads.
To be continued in the am.....
i just wanna tell you my speculation for 2013.. putty man "put master" and Danny boy surely trade.. "Dan_surely" will fight live in real person and end up becoming best friends! hahaha you guys are like a fucking married couple... a professional options trader only owns stock to delta hedge.. and even then they would much prefer other options to hedge! meaning they are constantly spreading their risk around different strikes.. obviously you guys have gone scary deep into the details philosophically about the two different strategies..... but my ideology follows the line that if your trading options your taking a view on Volatility time and direction.. so you can't just say.... OH i'm getting a great percentage return on the put sold compared to the margin i put out! or spread for that matter... if your not paying attention to the volatility you could be selling super cheap volatility and pay for it later by getting the stock at such a price that the premium you collected is irrelevant! i just wanna say this as well.. we are here to help eachother not to bicker pointlessly like a miserablly married couple that just will argue into eternity for argument sake..