I would say put selling has been around since there were puts.
Yes. ET had a bunch of guys get wiped out in '36 and '37 writing naked puts on tulip bulbs. I had spreads myself, but it was a wild ride.
Strategy: Selling Put Options: The Best Income Method?
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Yes. ET had a bunch of guys get wiped out in '36 and '37 writing naked puts on tulip bulbs. I had spreads myself, but it was a wild ride.
I wonder if the tip in the article has worked out for his readers. Here's the data of INTC on 2015-02-20 (expiration date of the used put options then):
Yes, it has worked out as the closing price of 34.41 on the expiration date is above the strike price of 34 :
(Even if it were that it didn't work out (so that on the expiration day one would have to buy the stocks),
the strategy is about owning the stock by using this intelligent strategy as the article clearly explains.
Kudos & thx from me to the author/editor Chad Shoop; I learned much from this article).
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Prices
Date Open High Low Close Volume AdjClose*
Feb 20, 2015 34.15 34.57 33.91 34.41 20,955,600 33.35Yes, it has worked out as the closing price of 34.41 on the expiration date is above the strike price of 34 :
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"All you have to do is tell your broker you want to sell to open the Intel, February 20, 2015 expiration, $34 strike put option"(Even if it were that it didn't work out (so that on the expiration day one would have to buy the stocks),
the strategy is about owning the stock by using this intelligent strategy as the article clearly explains.
Kudos & thx from me to the author/editor Chad Shoop; I learned much from this article).
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As I understand it, the strategy is not about naked selling puts, it rather is very normal put selling.
As the article clearly states one shall apply the strategy only on a stock that one would like to own.
Instead of buying the stock now, it rather recommends to apply this strategy and own the stock later on the expiration date
either by assignment, or in case of profit with the option strategy buy the stock manually only then if still interested in it.
Regarding using that strategy in a system: yes, you can monitor the prices realtime and close the options position
anytime before the expiration date. By this it is IMO possible to quit immediately before the credit minus the cost of the option is eaten up.
So, the net effect is that one indeed can limit the trading losses much better with this method than with any other method.
In this case one indeed would make no loss with the own account; the credit pays the loss, if any.
Don't you agree?
No...if the stock drops and vols spike you will have a loss to close and if the stock keeps dropping then you have a bigger loss or a stock at expiration way above market cost. Stocks do not move $0.01 a day.
Can you construct a hypothetical (or real) example with numbers (possibly with the numbers from the article) to back your opinion?
It would help me much to understand your argumentation, and where my possible misunderstanding could be.
Thx
Stock at $50, you sell the $45 put for $1.00. Stock starts selling off and vols spike where option jumps to $3.00, stock is at $45 now and keeps sliding lower. Not hard to imagine but since you cannot then you are not taking into account all the risks. Anyone who says they can simply get out of a naked position before it turns to a loss should not be trading named options, even cash secured short puts IMHO.
Just give also a timeframe where that change shall happen, ie. after how many days after opening the position shall that level be reached?
