So I would like to implement a strategy which involves writing naked options. Should I start an LLC so that I don't lose my shirt and do it through that entity? What are the consequences of doing so? Advice appreciated.
Should I Start an LLC to sell Options?
- Thread starter prochoice4life
- Start date
it sounds like you want to take a high level of risk. Just quickly thinking, if you write naked options that move against you strongly, in scenario A, you lose a boatload of money that you've put into your LLC. In scenario B, you lose a boatload of money in your own account, and you probably have to declare bankruptcy.
Neither of these seem like great options- you probably should avoid such risk- reaching for the 20%+ annual return just isn't worth it, either way, imo.
To directly answer your question, you'll have start-up and registration costs, and you may find it difficult to find a broker who will give naked-writing options trading levels to an LLC. And if they do, you may find that they close out your positions just in time for you to lose your shirt without losing their own.
Neither of these seem like great options- you probably should avoid such risk- reaching for the 20%+ annual return just isn't worth it, either way, imo.
To directly answer your question, you'll have start-up and registration costs, and you may find it difficult to find a broker who will give naked-writing options trading levels to an LLC. And if they do, you may find that they close out your positions just in time for you to lose your shirt without losing their own.
LOL!
Or is your user ID ProLifeByCHoice ?
But as heech said, you cannot pawn off risk onto a broker. They will make you guarantee trading losses personally. I have seen a few on ET claim they managed otherwise. I have doubts - as a former owner of a S corp, every vendor or institution as part of doing business with small LLC/S Corps made my personally guarantee every loan or anything else where they were at risk.
There are various funds, often run by CTA-registered trading managers, that more or less mechanically sell premium. Some of the names are well-known, some less so, but it's easy enough to find them. As a fund investor, you implicitly receive a zero-put on your account value. This might be appeal to OP. On the downside, you pay fees, and there might be a minimum investment issue, if OP is a living-in-Mom's-basement situation (I have no idea).