Selling Naked
- Thread starter nugya
- Start date
dreamer.maybe if you gave us a few more details on what you do we could better understand what your trying to say.tia.
Quote from nugya:
You are probably right but I am more comfortable with indexes
I agree nugya, I dont think you will ever wake up and see the index up 50 % overnight. Ive been playing around with out of money short strangles for a couple of months (10 to 13 % out ) and been doing ok. At least somethings working for me...lol.. after 2 bad months in the nq.
Ive been busy with other things to really get back to trading full time but may enter the options arena when im free to trade again.
I'm comfortable with short strangles on indexes but if I start to tinker with equities I would probably go with bull and bear credit spreads in order keep a limit on my losses...Protection from being killed by some Mr cook type scenario....
Ive found a site I may join for a bit to help me with the spreads until I really understand every possible outcome with my positions ...more of an educational endeavor rather then a guru search. Also Still searching for a program to help me Risk chart stuff ... I have ordered one...Dont know if it will be the one of choice untill I use it for a while ...
Good trading
Nick
I did some regular naked put selling on DIA and QQQ, assuming that the chance for they to go to 0 is low. I did get into water for a couple of times and have chosen to roll out or roll down.
Whilst I was a derivtives traderI sold naked call options 6% OTM with 2 weelks until expiry with at least 17% implied volatility, if the market had ever visited these stikes I would not sell them, carried this out from 1996 to 98 and it worked very successfully, ythose 2 weeks til expiry were kinda nervous and I remember some hefty margin calls.
An interesting idea is to fund the margin with stocks in those indices which in turn act as a kinda delta hedge.
6% out of the moneys now (the tinies we call them) are levels that have been visited many times so no naked sellin for me, but it worked back in 96-98 in that kinda bull market.
There is an interesting story in 1987of a local in the options pit @ LIFFE in London who sold out of the money puts and OTM calls,If u can recall there was a massive dump, his puts were deep in the money and he was getting shafted, facing bancruptcy and massive margin calls, he was hoping to get some money as premium back for his call options he sold which might just cover the bus fare home, but with such a massive move down the volatility had rocketed and he even lost moneuy on his calls having to buy them back with over 80% implied vol priced in despite them being about 20% OTM. He lost over £25M and has never been seen since.
The market favours the seller in options, that is true, and u will do well I'd say for 29 out of 30 positions selling OTM calls, but just be prepared for an almighty boot, if and when.
An interesting idea is to fund the margin with stocks in those indices which in turn act as a kinda delta hedge.
6% out of the moneys now (the tinies we call them) are levels that have been visited many times so no naked sellin for me, but it worked back in 96-98 in that kinda bull market.
There is an interesting story in 1987of a local in the options pit @ LIFFE in London who sold out of the money puts and OTM calls,If u can recall there was a massive dump, his puts were deep in the money and he was getting shafted, facing bancruptcy and massive margin calls, he was hoping to get some money as premium back for his call options he sold which might just cover the bus fare home, but with such a massive move down the volatility had rocketed and he even lost moneuy on his calls having to buy them back with over 80% implied vol priced in despite them being about 20% OTM. He lost over £25M and has never been seen since.
The market favours the seller in options, that is true, and u will do well I'd say for 29 out of 30 positions selling OTM calls, but just be prepared for an almighty boot, if and when.
many option newsletters are pushing covered calls as the least risky way to play options. selling covered calls and selling naked puts has the same risk reward scale so it isnt the selling naked that is the danger. it is the temtation to go oversize that gets you.