Naked Puts & Futures Contracts

J

jones247

I'm convinced that unless you have the trading skills of Steve Cohen or some other "market wizard", consistently timing the market is an overwhelming task. I'm not advocating the "buy & hold" perspective of Warren Buffet, although the "value investing" methodology has its place. In essence, simply selling puts against the market, with the plan to adjust at the appropriate price, should yield consistent profits over time. I would not adjust by closing out the option that I sold, as the option price could be easily a multiple of the premium I received. Instead, I would adjust with the futures contract. Now, if the futures contract begins to lose money, then I would adjust the futures contract with a long call.

I'm not sure if this belongs in the options forum or this forum; however, because it involves adjusting with the futures contract, here it is. Given the 1:1 ratio between an option contract and the futures contract (as well as the SPAN margin requirement vs. Reg T), I don't understand why many short equity options.

Walt
 
Quote from jones247:

I'm convinced that unless you have the trading skills of Steve Cohen or some other "market wizard", consistently timing the market is an overwhelming task. I'm not advocating the "buy & hold" perspective of Warren Buffet, although the "value investing" methodology has its place. In essence, simply selling puts against the market, with the plan to adjust at the appropriate price, should yield consistent profits over time. I would not adjust by closing out the option that I sold, as the option price could be easily a multiple of the premium I received. Instead, I would adjust with the futures contract. Now, if the futures contract begins to lose money, then I would adjust the futures contract with a long call.

I'm not sure if this belongs in the options forum or this forum; however, because it involves adjusting with the futures contract, here it is. Given the 1:1 ratio between an option contract and the futures contract (as well as the SPAN margin requirement vs. Reg T), I don't understand why many short equity options.

Walt
More...

I am going to be blunt, you have no idea what you are doing so for your own good drop the idea of selling naked index futures puts.

This is a flawed idea. There are no consistent profits over time. Selling naked index futures puts over time (even with adjust plans) is certain to wipe out your account.

The fat tails will destroy you.

Read about Victor Niederhoffer and his account blowout doing this.

Read what Nassim Taleb has to say about picking up nickels in front of steamrollers.
 
You must log in or register to reply here.
Back
Top