Naked puts on emini s@p

R

RedDuke

Kinda new to options. I had a discussions with a manager for a smalll fund about selling naked puts vs bull put spread. The puts are sold at least 100 points off strike, and the spread is bought another 60-80 points lower.

My point is that the spread is an insurance for black swan/fat tail events, but his point is that the put that is bought cuts into yearly return so much that it is not worth it, since naked put on emini index can be closed if the market moves agains the position too much.

He knows how to time good entries.

What do you think?
 
Quote from RedDuke:

Kinda new to options. I had a discussions with a manager for a smalll fund about selling naked puts vs bull put spread. The puts are sold at least 100 points off strike, and the spread is bought another 60-80 points lower.

My point is that the spread is an insurance for black swan/fat tail events, but his point is that the put that is bought cuts into yearly return so much that it is not worth it, since naked put on emini index can be closed if the market moves agains the position too much.

He knows how to time good entries.

What do you think?
More...

I have found that my most profitable and least worrisome trades with the es have been when the vol was inflated and i sold naked 3-6 months out. just my experience.
 
Quote from RedDuke:

Kinda new to options. I had a discussions with a manager for a smalll fund about selling naked puts vs bull put spread. The puts are sold at least 100 points off strike, and the spread is bought another 60-80 points lower.

My point is that the spread is an insurance for black swan/fat tail events, but his point is that the put that is bought cuts into yearly return so much that it is not worth it, since naked put on emini index can be closed if the market moves agains the position too much.

He knows how to time good entries.

What do you think?
More...

I think he's correct. One reason to trade these broad based indexes, is that they offer protection from events. Single stocks have 30% down moves everyday, SPY does not.
 
Thanks for replies.

His other point was also that selling further out of the money puts, at less premium, would still be better that nearer of of the money spread.

Are ES options the most liquid electronically traded one for s&p?
 
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