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What's wrong with getting puts assigned?
- Thread starter Eliot Hosewater
- Start date
martingale is double down strategy ie - at blackjack - lose one $5 bet - bet $10 - lose the $10 - bet 20$ - lose $20$ - bet $40. unfortunately, like writing calls or puts - can work swimmingly until the one big loss and then you are salting fries at jack in the box wondering what the hell happened.
Short answer, nothing wrong with getting assigned.
Usual put assignment horror story goes something like this; Bob (tried to assign as generic a name as possible) thinks its neat and great to collect premiums on writing puts. He does it a little with success and no assignment. Bob thinks, man I could do this every month and generate a lot of cash flow. Bob replicates process for many months. Then Bob starts to slowly extend past appropriate risk tolerance levels and then, presto, the market starts to tank (like the last couple of days) and he takes assignment on a bunch of stock he REALLY NEVER EVER INTENDED TO OWN AT ANY PRICE.
You see, if writing puts is a part of an overall process that has been evaluated and conforms to your personal specifications, there's absolutely nothing wrong with assignment. Later this week I expect (hope) to be assigned some stock. It is stock that will be used to build a position that I have evalutated and expect to make calculated returns upon.
The problem with assignment usually comes when the writer starts to chase premiums and gets overextended.
Good Luck.
Usual put assignment horror story goes something like this; Bob (tried to assign as generic a name as possible) thinks its neat and great to collect premiums on writing puts. He does it a little with success and no assignment. Bob thinks, man I could do this every month and generate a lot of cash flow. Bob replicates process for many months. Then Bob starts to slowly extend past appropriate risk tolerance levels and then, presto, the market starts to tank (like the last couple of days) and he takes assignment on a bunch of stock he REALLY NEVER EVER INTENDED TO OWN AT ANY PRICE.
You see, if writing puts is a part of an overall process that has been evaluated and conforms to your personal specifications, there's absolutely nothing wrong with assignment. Later this week I expect (hope) to be assigned some stock. It is stock that will be used to build a position that I have evalutated and expect to make calculated returns upon.
The problem with assignment usually comes when the writer starts to chase premiums and gets overextended.
Good Luck.
Well, mathematically it works assuming two things:
- you have unlimited $$$ to keep doubling with each loss (in which case you wouldn't need to be doing this);
- you win eventually, then start again.
That's why casinos have table limits.
Edit: I actually saw someone a few days ago saying he was going to try this at another options forum.
- you have unlimited $$$ to keep doubling with each loss (in which case you wouldn't need to be doing this);
- you win eventually, then start again.
That's why casinos have table limits.
Edit: I actually saw someone a few days ago saying he was going to try this at another options forum.
Quote from niceneasy:
martingale is double down strategy ie - at blackjack - lose one $5 bet - bet $10 - lose the $10 - bet 20$ - lose $20$ - bet $40. unfortunately, like writing calls or puts - can work swimmingly until the one big loss and then you are salting fries at jack in the box wondering what the hell happened.
Well, you could have bought Enron stock, and not received the put premium.
I asked a guy at Schwab why they let anyone own a naked stock, but you must be "qualified" to sell a naked put. He tried to explain why naked puts were riskier.
I asked a guy at Schwab why they let anyone own a naked stock, but you must be "qualified" to sell a naked put. He tried to explain why naked puts were riskier.
Quote from daddyeaux:
you might have the self inflicted misfortune of writing puts on something like Enron.......
what could possibly go wrong?