Selling naked calls OTM & covering them just before ITM?

anon9812 said:
What loss are you taking about? I’m not going to buy them back, I’ll let them expire and keep the collected premium.
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you keep the premium on the option but can lose many times that on the stock. You approach the strike, buy the stock. Stock falls. Or you blow through your strike and don’t have time to hedge.

it’s not riskless. Absent a real view, its as risky as just staying short the naked call or selling an atm call naked.

I can think of one scenario where this will work but it’s not riskless either and the return is very low.
 
One can limit the risk to a desired value by using spread constructs, or spread-like constructs.
Then naked shorting loses its dangers.
Study for example this Bull Put Spread: https://optioncreator.com/stsskby
In this example the Risk/Reward is 3.81/6.19

Bull_Put_Spread.png
 
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Oh,now i get it..stock rips,your going to be synthetically short puts for goober after a massive run up..Back up the trucks,what could possibly go wrong??


anon9812 said:
What loss are you taking about? I’m not going to buy them back, I’ll let them expire and keep the collected premium.
More...
 
I got the impression he was selling the 120% percent calls,stock rips 20 percent and he then decides to buy the full notional(short put) as opposed to delta hedging and being short the synthetic straddle.Either way,its a stroke of genius
 
anon9812 said:
As the title says, I’d like to sell naked calls far OTM and cover them by buying the underlying if the price approaches the strike price so that they’re covered when ITM.
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What do you think you gain by buying "just before" it goes ITM?
 
taowave said:
I got the impression he was selling the 120 calls,stock rips 20 percent and he then decides to buy the full notional(short put) as opposed to delta hedging and being short the synthetic straddle.Either way,its a stroke of genius
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You mean the arb? You buy spot one tick before it touches the magic-strike and it's hookers, pizza and beer! But you gotta buy it a tick before... one tick.

Seriously, he's letting the options expire worthless so all is well.
 
taowave said:
lol..peace of mind,security,or a serious spike in blood pressure (or worse) when the stock tanks
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Don't you get it? We're not talking biotechs here. Just short the strike -> buy stock at the strike -> ring the register.
 
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