Selling Naked
- Thread starter nugya
- Start date
It doesn't matter what your returns are a year doing this strategy. It could be 1000% a year. One event, one singular event will wipe out every profit you ever made the last 10 years, and then it will take whatever is left. I assure you, you will be bankrupt soon. In the world of dynamic hedging, you cannot hedge a naked portfolio. It's not possible. And in times of crisis everything is 100% correlated to everything else. No such thing as diversifying naked premium.
The black swan always gets it man.
Quote from BCE:
dreamer,
Maverick74 is right you know. Just too dangerous and nowhere to hide if things really go against you. Hope you read the Mark Cook story in my previous posts here. Good luck to you.
Sorry, BCE, you and Maverick are both wrong. You are not really thinking this through.
BTW, I read your story and enjoyed it thoroughly. It was a classic example of a trader not using good judgement by putting on a very risky position that could and did threaten his entire financial net worth. Lots of interesting trader-gone-broke stories like that are out there, in all markets. The old "fear versus greed" thing, with failed traders usually succumbing to the greed thing, although some go broke due to fear.
Good luck trading to all,
Bob on Whidbey Island
"Don't confuse effort with results."
The premium seller most likely should be relagated to accepting a small amount of return on their account with small positions. Premium sellers meet their demise by either having on too large of positions or simply not managing the risk when a trade goes against them.
If these two are kept under strict scrutiny, there is profit to be made without extreme adverse risks.
Good trading.
If these two are kept under strict scrutiny, there is profit to be made without extreme adverse risks.
Good trading.
I typed this post a while ago and had it wiped out just before I posted it as my browser crashed. Grrrrr. Don't you just hate it when that happens?
The thing is that a lot of traders don't really realize the extremes of the risks they are taking on. Risks like the kind that Mark Cook ended up discovering. They're not thinking about those kinds of risks. I learned about this directly myself last July trading a seemingly safe position in equities and I think that until you learn it directly you may not be paying it enough attention. I was trading EMC and still had 1500 shares right after the closing bell at around $30/share. Was down about $300 as it dropped about 30 cents in the last couple of minutes and thought I'd hold it for a possible bump in the after market and get my money back. What happened instead was they issued an earnings warning, trading was halted for 1 1/2 hr. and when it resumed I was out $10,000. Obviously didn't feel very good. And it certainly could have been much much worse.
If you're putting on a position without being aware that this type of thing could happen or what happened to Mark could happen, then you're living in fantasy land and as was pointed out earlier in this thread you're playing Russian Roulette.
The thing is that a lot of traders don't really realize the extremes of the risks they are taking on. Risks like the kind that Mark Cook ended up discovering. They're not thinking about those kinds of risks. I learned about this directly myself last July trading a seemingly safe position in equities and I think that until you learn it directly you may not be paying it enough attention. I was trading EMC and still had 1500 shares right after the closing bell at around $30/share. Was down about $300 as it dropped about 30 cents in the last couple of minutes and thought I'd hold it for a possible bump in the after market and get my money back. What happened instead was they issued an earnings warning, trading was halted for 1 1/2 hr. and when it resumed I was out $10,000. Obviously didn't feel very good. And it certainly could have been much much worse.
If you're putting on a position without being aware that this type of thing could happen or what happened to Mark could happen, then you're living in fantasy land and as was pointed out earlier in this thread you're playing Russian Roulette.
Quote from BCE:
I typed this post a while ago and had it wiped out just before I posted it as my browser crashed. Grrrrr. Don't you just hate it when that happens?
The thing is that a lot of traders don't really realize the extremes of the risks they are taking on. Risks like the kind that Mark Cook ended up discovering. They're not thinking about those kinds of risks. I learned about this directly myself last July trading a seemingly safe position in equities and I think that until you learn it directly you may not be paying it enough attention. I was trading EMC and still had 1500 shares right after the closing bell at around $30/share. Was down about $300 as it dropped about 30 cents in the last couple of minutes and thought I'd hold it for a possible bump in the after market and get my money back. What happened instead was they issued an earnings warning, trading was halted for 1 1/2 hr. and when it resumed I was out $10,000. Obviously didn't feel very good. And it certainly could have been much much worse.
If you're putting on a position without being aware that this type of thing could happen or what happened to Mark could happen, then you're living in fantasy land and as was pointed out earlier in this thread you're playing Russian Roulette.
That's good advice, BCE. One must always be aware of the risks of a position they establish. Just think about all those "investors" that buy a stock and tuck it away. The market and the stock go down and they are like a deer in the headlights, frozen. How many went down with the market, refusing to review their positions daily or even weekly? Far too many.
Trading in the markets is a very fluid thing, requiring constant diligence and adjustment.
thanks for bringing this thread back to live again.
Selling naked is all about risk management. although the reward is not as much as one hopes, one can generate steady income from it.
Lately I am covering my naked sells with deep OTM buys which some may argue that totally unnecessary.
As i mentioned in my earlier posts, I am not worried about the Greeks of the options. I keep all my options on a spread sheet and check my maximum loss for expiry. I make sure that I am comfortable with the loss I may suffer.
The rest is simple sell CALLS when the market is going up and sell PUTS when the market is going down. I cover my sells if the price is down by 50%.
I only do index options and sell options which has 60 days or less time value.
Good luck
Selling naked is all about risk management. although the reward is not as much as one hopes, one can generate steady income from it.
Lately I am covering my naked sells with deep OTM buys which some may argue that totally unnecessary.
As i mentioned in my earlier posts, I am not worried about the Greeks of the options. I keep all my options on a spread sheet and check my maximum loss for expiry. I make sure that I am comfortable with the loss I may suffer.
The rest is simple sell CALLS when the market is going up and sell PUTS when the market is going down. I cover my sells if the price is down by 50%.
I only do index options and sell options which has 60 days or less time value.
Good luck