I trade on the indices (ndx, rut, spx). At least in those cases I couldn't find a case where a OTM naked put would get more return. Especially due to the margin requirement I couldn't get more then 20% annualized in those trades vs 30-40% with credit spreads/iron condors.
Naked Option writing?...
- Thread starter StockyIrishman
- Start date
The risk between spreads and naked options is comparable. If the market moves 10-15% against you in a short amount of time , you are toast either way.
Well if you had credit spreads or short strangles or iron condors before Oct 87, I doubt your account would have fared much better. Just about any bullish/neutral strategy would have gotten you killed.
With credit spreads you can do certain types of hedging (buying way OTM IBM or MSFT puts) so a black monday could at least break even.
My problem is that Scottrade won't let me sell naked options or spreads without owning the stock. 
Quote from StockyIrishman:
My problem is that Scottrade won't let me sell naked options or spreads without owning the stock.
From what you're stating here, they will only allow covered calls and cash-secured synthetic CC [short puts]. I seriously doubt they're going to allow a short synthetic straddle [long spot/short 2 calls].
Please, don't belabor their policies; simply open an IB or TOS account.
Get out! Scottrade is one of the worst brokers for options i found. Currently I use TradeKing and Interactive Brokers.
The point is that with proper risk management you know how much you could lose maximum with the credit spreads. If you went equivalent with the naked puts you would have a whole lot more trouble on your hands.
Both would certainly lose money, but if you use same position sizing the nakedness would kill you.
Thanks for the heads up. I was also considering tradestation. Anyone use them for options?
Also, do previously suggested option services very liquid? About the only thing I do like about Scottrade is that I have checks I can write to withdraw directly from my account and there is a local branch that I can walk into to talk to someone [all-be-it not very bright].
Also, do previously suggested option services very liquid? About the only thing I do like about Scottrade is that I have checks I can write to withdraw directly from my account and there is a local branch that I can walk into to talk to someone [all-be-it not very bright].