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Naked Put Options
- Thread starter Gmoyer3292
- Start date
Your broker might be talking about what level of option trading they have you approved for. A lot of brokers will not allow this unless you have 50k in the account and some experience.
which page and who says that. That is complete bollocks. Naked Put selling can for some underlying assets be less risky than naked call selling. Think of options on commodities. But in any way selling naked options is NOT illegal and has never been and will never be. As pointed out there is a chance that its not allowed in regards to certain account types.
Quote from Gmoyer3292:
Well my broker did not use the term illegal but I knew what he was
getting at. They do let me write covered puts.
This months issue OCT of Stocks and Commodities Magazine does say the practice is illegal.
Thanks to all who responded to my question.
not criminally liable but liable to pay up. That is the underlying point why facing the options exchange is safer than facing any other OTC counter party.
Quote from PetaDollar:
NAKED put writing means you write a put and do not have the cash to buy the stock if the put is exercised.
I write puts in my IB IRA all the time. You have to have sufficient cash to cover the exercise and they lock the cash up as long as your position is open.
So if a broker lets someone write a put, and that guy doesn't have the cash when it is exercised, is the broker responsible? Or criminally liable?
Quote from MTE:
Selling naked puts does carry a high level of risk.
Just as much as any other leveraged trade. Put on a 50:1 forex trade and see how long your money lasts if the trade goes in the wrong direction.
Not to say that it is not risky, but I am amazed at how many people think it is ok to trade 3:1 ETF's... That's leverage again, and it cuts two ways.
Quote from christianhgross:
Just as much as any other leveraged trade. Put on a 50:1 forex trade and see how long your money lasts if the trade goes in the wrong direction.
Not to say that it is not risky, but I am amazed at how many people think it is ok to trade 3:1 ETF's... That's leverage again, and it cuts two ways.
Yes, I agree.
They are very similar to covered call except you pay less in commissions. You can always do naked put (cash secured) if your account is approved for higher level of options trading. I guess the highest level of approval allows you to sell naked put for guarentee of less than 100% of cash value (say 30%).
Brokers'll lock your cash/margin for the period while your position is open. Nothing illegal about it.
Brokers'll lock your cash/margin for the period while your position is open. Nothing illegal about it.
The magazine article I am refering to is the oct issue of Stocks and Commodities. The Get Shorty Article on Page 44 and 45.
The article states if you do not secure or intend to secure your short shares it is an illegal practice.
Sorry for any misquote or misunderstanding.
The article states if you do not secure or intend to secure your short shares it is an illegal practice.
Sorry for any misquote or misunderstanding.