Naked Option writing?...

S

StockyIrishman

My broker Scottrade doesn't allow naked option writing [calls or puts]. I have been limited in my option abilities and would like to do some bull call spreads, and other option strategies buying the stock to cover my position

Do any of the larger online brokers I.B, cybertrader, Tradestation, etc... allow naked option writing.

Scottrade doesn't seem to understand that if I buy 10 $30 calls and sell 10 $35 calls they balance out. :(

Any tips or suggestions on low priced option brokers that are flexible in strategies?

THanks for any feedback
 
Any good option broker will allow you to enter into spreads or sell options if you have sufficient margin. Scottrade is far from being an option broker.

These are:

OptionsXpress
Thinkorswim
InteractiveBrokers
 
Thinkorswim.
Once you're approved for options trading you can trade any strategy you want provided you can meet the margin requirements.
 
Quote from MTE:

Thinkorswim.
Once you're approved for options trading you can trade any strategy you want provided you can meet the margin requirements.
More...

I filled out Scottrades Options trader application and have been trading over a year with them with 100K. I kept getting error msgs when I would try to sell calls saying " My account doens't contain enough stock to sell the call to open". Lame lame lame.. I wasted a $500 subscription to optionmonster.com because most of their tips/option activity needs you to do spreads in order to hedge right.

Any other brokers that will allow naked selling?
 
Ex-nay on the optionmonster nay. I'd skip that puppy. Flat out waste of time and money. If I told you every good call I made and never elaborated on the bad ones, I'd have people lining up too.

PS. Don't forget the standard pony-tail too. Its a necessity if you want to trade options profitably.
 
You may also want to look into doing credit spreads instead of naked option writing. In my analysis I found the profitability much better in spreads with lower risk.
 
Quote from unclescrooge:

You may also want to look into doing credit spreads instead of naked option writing. In my analysis I found the profitability much better in spreads with lower risk.
More...


I have found that you can sell strikes further away from the market when naked. What did you find?
 
Quote from just21:

I have found that you can sell strikes further away from the market when naked. What did you find?
More...

You can sell strikes further OTM for more premium relative to credit spreads but naked puts canbe a ticking time bomb. At least with spreads you know your exact max risk going in to the position and with indexes you can still go far OTM for good premiums while being a little more conservative. Also you know your exact margin going in and that will not change.

With naked puts you certainly need deep pockets for the margin if you are doing this on indexes and that margin can explode if the market drops and IV spikes as well. You get more premium but there is always a risk/reward trade off, more reward is a result of more risk.

If you manage the % of your portfolio correctly a creidt spread can never blow you out but if you get aggressive with short puts you can really be taken out quickly.

My main point is, if you are going to sell options naked, look to use credit spreads instead to better limit the amount of risk you are taking on and even nuetralize in some way the effects of vega to an extent.
 
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