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not selling puts for unstable companies
- Thread starter ofinance
- Start date
Quote from ofinance:
because there is no stock i want to own, there is not a single stock that is higher at jan 2009 than it was at jan 2007!
all the stocks are down and they slashed their dividend so whats the point in owning any? because it will go from $2 to $60? i will not hold my breath on that.
if a stock is at $6 its overpriced
Then you provide your own answer to my suggestion: Don't write naked puts. That's not the right strategy for you.
In my opinion, naked put selling is appropriate <b>only</b> for traders who want to own the underlying stock.
Mark
Quote from dagnyt:
Then you provide your own answer to my suggestion: Don't write naked puts. That's not the right strategy for you.
In my opinion, naked put selling is appropriate <b>only</b> for traders who want to own the underlying stock.
Mark
I contracted out houses to build one year and learned that there is a old saying in the building business. Never build a spec house that you don't mind moving into.
Quote from jficquette:
I contracted out houses to build one year and learned that there is a old saying in the building business. Never build a spec house that you don't mind moving into.
thank you and thank everybody for the replies, iam not saying there is a free lunch because there is not and option prices are almost never wrong.
GM puts are very atractive to sell because, i will quote someone in another thread who said, there is plenty of FEAR priced in there, i just read on yahoo news that the government rejected further bailout money to be given to the automakers and there was also some talk about "controlled" bankruptcy.
Don't you think a stock has to be kind of crappy to get to $5 in the 1st place? It didn't start out at that price. Yes, everything gets beaten down when the market falls, but not usually to $5. I am hard pressed, even now or a month ago when the market was lower, to think of a truly quality company that is selling for $5. (By a quality company I mean one I would want to own and would therefore be willing to write puts on.) So actually you are looking for the 'least crappy' <= $5 companies.
Quote from dagnyt:
Then you provide your own answer to my suggestion: Don't write naked puts. That's not the right strategy for you.
In my opinion, naked put selling is appropriate <b>only</b> for traders who want to own the underlying stock.
Mark
Mark,
I have to disagree with you as far as wanting to own a stock. For instance one of the advantages of selling puts in beaten down stocks is that often the stock is so hard to borrow that you can risk very little and collect ALOT of premium. This is because conversion and reversal markets have to stay in line somehow to make up for the HTB market in the stock. For instance, if you looks at F you can sell the jan 2010 2.5 put for about 1.15, thats not exactly a ton of risk. But the stock is so heavily shorted the the implied interest rate has pumped up the put so much that this sale may or may not end up being desirable, whether or whether not you want to own Ford (I dont cause I hate the Lions)
Mark who doesnt mind having other Mark's
www.option911.com
Quote from drcha:
Don't you think a stock has to be kind of crappy to get to $5 in the 1st place?
BAC and GE both got to $5, are you saying these two companies are crappy? i don't think they are especially not GE
if you are concerned one company could go bankrupt, you can sell puts on a basket of stocks or on an ETF if you can find one at around $5, you are therefore less vulnerable to the situation of just one stock
Quote from option911:
Mark,
I have to disagree with you as far as wanting to own a stock.
To 0ptions911,
Disagree all you want.
My position is that writing naked puts is too risky for most investors. I think it's a great learning strategy for rookies and I love it as a teaching strategy.
But for traders and especially for investors, I recommend selling put spreads instead. Risk management and limiting losses is the #1 key to prosperity when trading options.
I'll add this: You should be intelligent enough to understand that selling a put with a strike price of 2.5 or 5 is not what I am referring to when I advise not selling naked puts.
That's my opinion. That's what I believe. As I said, you can believe anything you want to believe.
Mark
Quote from option911:
if you looks at F you can sell the jan 2010 2.5 put for about 1.15, thats not exactly a ton of risk
thats what i thought too and i think its quite interesting for the trader who sells the put and a sure loosing trade for the market maker who will have to buy it
i would like to ask a question: how can the market makers aford to buy such overpriced put options? are they convinced F will be billow $1.35 ($2.5-$1.15) by jan 2010?