Nope. Think about it--"unlimited" risk (as the stock can go to 0), limited gain (the most you can collect is your premium for the sold call.
Exactly the same as a naked put.
new trader
- Thread starter RunTrade
- Start date
Nope. Think about it--"unlimited" risk (as the stock can go to 0), limited gain (the most you can collect is your premium for the sold call.
Exactly the same as a naked put.
A short put is the same as a covered called however your broker will require you to have enough cash on hand to buy the stock if it is "put" to you som it is sometimes known as a cash covered put.
For the new trader you may want to look into trading KOSPI options as they are very liquid and are without many of the limitations of US option markets(Pattern day trading, open orders on one side of the market only).
The other thing you may want to look at is buying futures options and trading the underlying overnight. If you were to buy an ES put at 4pm eastern and buy the future during the overnight session you would likely stay out of trouble.
I just want to post a quick hallelujah for someone pointing out that shorting puts naked is the same as covered calls. No one seems to remember this... ever. Also, it is a cheaper trade to make, only one transaction. And if you are required to hold enough cash to buy the stock should you get assigned it is still no different than a covered call because in that instance your cash is already in the market holding the stock.
I've heard idiots go on and on on CNBC about the joys of covered calls and no one ever brings up the naked short put.
I almost subscribe to the belief that if you are a medium term investor and your stock has a fairly liquid options market, never buy the stock just short the put side of the straddle.
I've heard idiots go on and on on CNBC about the joys of covered calls and no one ever brings up the naked short put.
I almost subscribe to the belief that if you are a medium term investor and your stock has a fairly liquid options market, never buy the stock just short the put side of the straddle.
Quote from bighog:
Futures are the way to go for a off the floor trader. Options are for floor traders not screen traders.
PERIOD!!!!!
Many options traders sooner or later move over to futures, that means that unless you are on the floor of options exchange you are in trouble. Why not start on the road most traveled, seems like a better choice from the start.
My question has always been; What is the lure of options trading? O'sure they say the losses are defined, but if proper risk management rules are used, losses are 99% defined in anything.
Check this out, unless you take out a loan with your bookie, your losses are 100% defined....
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Big hog;
True one can ride some big trends in futures.
However can think of at leas 3 things that favor options, for a new , starting trader;
and note the repeating pattern of Option Trader mentioning difficulty of ''consistant profits in options ''
1]You know as well as i do futures run those ''search & destroy missions'' Options & stocks do big trends also big hog.
2]lMany people like Rich Dennis etc..who prefer liquidity iof futures to options, again that doesnt favor newbie;
but would rather be in stocks or options where Rich Dennis is NOT.
In other words learn from Rich/Schwager , not compete with him
3] Most important ,it would be MUCH easier for a new trader to lose MUCH more in futures;
& lose so much you owe broker money & go BROKE.{MORE than 100% LOSS with futures margin}
I actually think options could be easier for beginners. The most important thing to do when you are a beginner is to limit your risk and diversify. These things are much easier to do with options than with the underlying, especially if you have a small account. The problem is most beginners don't apreciate the importance of these things and so they usually use options as vehicles to increase their risks rather than to limit them, so paradoxically options end up being "bad for beginners".
Hey:
When I read these posts I guess I have to smile. They are all the same, with the author telling us how he/she is prepared by virtue of some education and the desire to trade.
THEN we hear that they have very little money to work with, AND they have no real experience in the market they have chosen.
BUT perhaps they can make up the difference by what, reading posts here at ET? By reading books? By taking a weekend seminar? OR perhaps by asking if someone here will "mentor" them. Which will it be today?
$15,000???? WTF are you thinking? ARE you thinking?
Tell you what, I think I will go and become a physician. I figure I can go and buy the same books they teach out of at med school. I am a fast learner, and I will just sit down and read through them this next month. Then I will pick a specialty, like.....plastic surgery.....I will take a couple of seminars, and then put up my shingle and start doing facelifts. Or maybe I will do boob jobs. Yeah thats the ticket. I will start a new career giving women tits so big they have their own zip code. After all I am trained as an engineer originally, and this is no different than building a suspension bridge or a small office building. Yep, I am going out to the book store right now and get started. See ya.
Steve
When I read these posts I guess I have to smile. They are all the same, with the author telling us how he/she is prepared by virtue of some education and the desire to trade.
THEN we hear that they have very little money to work with, AND they have no real experience in the market they have chosen.
BUT perhaps they can make up the difference by what, reading posts here at ET?
By reading books? By taking a weekend seminar? OR perhaps by asking if someone here will "mentor" them. Which will it be today?$15,000???? WTF are you thinking? ARE you thinking?
Tell you what, I think I will go and become a physician. I figure I can go and buy the same books they teach out of at med school. I am a fast learner, and I will just sit down and read through them this next month. Then I will pick a specialty, like.....plastic surgery.....I will take a couple of seminars, and then put up my shingle and start doing facelifts. Or maybe I will do boob jobs. Yeah thats the ticket. I will start a new career giving women tits so big they have their own zip code. After all I am trained as an engineer originally, and this is no different than building a suspension bridge or a small office building. Yep, I am going out to the book store right now and get started. See ya.
Steve
wow what a horrible analogy
lolI guess I need to mention that I am finishing my degree in Finance, getting an internship with a trader, and plan on spending 6-8 months preparing myself before starting to trade so that steveo here doesnt immediately label me as some "wannabe cuz it sounds like fun".
Anyways, thanks for the input. I do agree with some of you who believe options are a viable path for beginners if and only if their trading methods limit risk properly. The only difference I see if starting capital is 15k or 150k is the approach you take on with the risk:reward ratio you choose.
I suppose, but you might want to take a look at the Probability of Ruin formulas. The more you demand from your money, the more likely you are to lose it all. Let's say 30% is a good yearly return for a good trader. You shouldn't be expecting to make more than $4500 per year. If you're expecting (or trading for) more then that, the odds highly favor your losing it all.
I hope what you meant is that you were going to make less risky trades with your $15k rather then more?
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Runtrade r;
Like the earlier plans of Ups or CBOE work, check out;
sfomag.com
free medium age article about CBOE, detailed info like B.Brodsky/CBOE.
And while 15k is enough to start a service business, especially if you are debt FREE, car paid for, burning desire to be entrepreneur, takes most people , not all , longer than college age.
You could be another like Rich Dennis $ earner ;
but laws of probability favor you doing it with Windex ''with ammonia D'', rather than Derivatives.
Bottom line, Runtrade-nickname , yes ,can make some good $;
but even with a nice/huge bid ask on stuff like SHW,LOW,
would rather write contracts with that stuff , than try for quick trades with them.[neither SHW or ,LOW is a stock tip].
Even Risk arb mentioned exspensive contracts.
And sounds like you are wise enough to look/study for patterns that others don't study;
SHW execs make plenty of $ with options [LOW execs made nothing with options ,last glance according to yahoo.com].
And look @ SHW execs medium age [centerpoint approx age,]AND their other source of income, includes commercial,retail;
& SHW used to ,& probably still does gives their non execs[employees] special deals on underlying stock.
Wisdom is profitable to direct.
