Let me make a couple of points:
1. Put Master sells naked puts just as this lady does now.
2. I sell spreads which she says is what she used to do. i think the spreads are safer but (I think) she likes the higher premium on the naked short puts. As she says... my risk is pre-determined, hers and PM's is not.
3. She says she risks 50% of her capital which means she is sacrificing about half of her potential in the interest of safety. I use a similar percentage... sometimes a little more, sometimes a little less. (Since she is doing trades with an open ended risk she doesn't say how she calculates that... but I think I know.)
4. Both PM and I do individual stocks not indices. This is a big difference.
5. I try to concentrate on writing put spreads on stocks that are 'disaster resistant' . I maintain a stable of such stocks.
e.g.
http://finance.yahoo.com/q/bc?t=5y&s=CWT&l=on&z=l&q=l&c=TLT&ql=1&c=^GSPC
If the market tanks CWT and TLT won't... nor will the other 20 stocks in my list. Actually from past behavior Treasuries (TLT) will go up if the stock market crashes.
8. I write trades that are calculated to yield about 15% annualized... she uses the exact same number. With 50% deployment she should be making 7.5% annualized.
7. I also try to do a mixture of both short and long trades. e.g. at Jan expiration I will have a bear call spread on BBY expire. I also use bear put spreads which have much much higher potential yields in a downturn (but which are debit spreads rather than credit spreads). Both of these would tend to balance out losses in the event of a market disaster. These are not solely 'hedges'
but profitable trades in their own right.
8. Like her I have done some spreads on volatility as a hedge but have stopped doing that because it simply introduces another uncontrolled variable and I frankly can't calculate the right size hedge. There are other ways of doing the same thing.
9. This is not to say I would not be hurt by a deep market dive, but I believe I am ready for such an eventuality.
