Selling Naked
- Thread starter nugya
- Start date
Exactly! If you sell a naked call now chances are the stock will be worth 50% more a month from now. Even an index could easily appreciate by 25%
Now is not the time to be buying treasuries or selling calls. I'm not saying it's time to buy equities blindly either, we are probably only somewhere between 50% and 80% done with the bear market, but I would say the risk of a significant rally in equities is at least as great as the risk of a significant further decline.
Lobster and Doji have the best perspective on selling puts. To me I have to make the same decision as if I were to go long anything. If I would not buy it, why sell the put? The put though gives you the added advantage of time and movement.
Sept 11 put me in a situation similar to 87 crash. But I had the cash to pay for the puts if the underlying went to zero. If I had done the same thing with a few S&P contracts I would have gone broke. But isn't that the same as buying a futures contract on max margin and getting booted off your system during a panic?
Selling a put carries the same risk as selling a covered call. With the added benefit that it is easier and cheaper to cover on a rally and you can short into the put if things go against you.
Sept 11 put me in a situation similar to 87 crash. But I had the cash to pay for the puts if the underlying went to zero. If I had done the same thing with a few S&P contracts I would have gone broke. But isn't that the same as buying a futures contract on max margin and getting booted off your system during a panic?
Selling a put carries the same risk as selling a covered call. With the added benefit that it is easier and cheaper to cover on a rally and you can short into the put if things go against you.
Further more;
If you get ruined by selling naked PUTS(pref index ones) you will not be alone.There will thousands of people around you whose pension fund ruined as well. They will understand.
On the contrary if you get ruined by selling naked CALLS, while most of the people enjoying their new wealth, you will be among few who will be suffering..
So it is better to sell PUTS then CALLS
If you get ruined by selling naked PUTS(pref index ones) you will not be alone.There will thousands of people around you whose pension fund ruined as well. They will understand.
On the contrary if you get ruined by selling naked CALLS, while most of the people enjoying their new wealth, you will be among few who will be suffering..
So it is better to sell PUTS then CALLS
I sometimes sell puts naked but it is a bitch when the UPS guy or gal rings the doorbell. ....
Kidding aside, selling naked puts as opposed to covered writes in equities has a bigger theoretical edge due to the skew. You will find that given a call and put equidistant to the underlying, the put cost more, there are other factors such as dividends to consider but in general terms don't overlook put selling as opposed to covered writes.
Kidding aside, selling naked puts as opposed to covered writes in equities has a bigger theoretical edge due to the skew. You will find that given a call and put equidistant to the underlying, the put cost more, there are other factors such as dividends to consider but in general terms don't overlook put selling as opposed to covered writes.
maglia rosa
Guest
I don't quite agree with this reasoning here. Skew has as much an effect on the call as on the put on the same strike line. You have to compare the short put to the buy-write (covered call) in the same line, for example long stock at S and short the 45 call is synthetically being short the 45 put. The 45 call obviously will have equal skew as the 45 put.
Comparing shorting the 45 put, but then long stock (Forward stock say 52.5 for "equidistant" strikes) and short the 60 call (which is being synthetically short the 60 put) is not the same position.
You can however gain edge/minimize theo loss if you're able to spot public resting bids and pick those to your advantage when deciding whether to short the put or to buy stock and sell call.
Obviously you'd sell whatever is bid for higher in implied vol terms (pricing it off the offer in stock since w/ the buy-write you're lifting the offer in stock).
Has anyone done any research on the tradeoff between selling naked and selling a vertical? I feel a lot better having that exposure capped but most times the long side is nothing but a drag on the position.
Maybe I mispoke. I am not inferrring that short put at 45 strike and long covered call with stock @ $50 plus short 55 c are the identical. Options are nothing more than insurance policies with the strike prices acting as 'deductibles' . What I am refering to is that that the presence or absence, the degree of a skew makes certain contracts better sells/buys even though they are different. Sort of like shopping for rental insurance and choosing between a $500 annual premium with a $500 deductible OR $400 premium with a $3000 deductible. They are meant to do the same thing-protect your stuff, but different in the pnl profile and certainly value.