Hey all you fun trading guys & gals - here is a blast from the past... a great number from paul7313 rockin the 1's and 0's . Git Down!
Subject: [TheOptionClub.
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From: paul7313 <paul7313@yahoo.
Date: Mon, Jan 26, 2009 at 11:45 AM
To: OptionClub@yahoogro
I want to sell naked puts and calls. need broker permisson.
What do I need to be careful of doing this type of trade?
Can and how do I make money doing this?
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From: James Fink <jimfink@yahoo.
Date: Mon, Jan 26, 2009 at 11:56 AM
To: OptionClub@yahoogro
| Selling call options naked entails unlimited risk, and selling naked put options entails substantial risk (i.e., stock price down to zero), so you need to severely limit the number of contracts you trade. The flip side is that your probability of success is greater with naked options than it is with spreads. The margin requirement is large for naked options sales, but I would definitely not max out on that margin but rather would stay at no more than 10% of the margin allowed. --- On Mon, 1/26/09, paul7313 <paul7313@yahoo. From: paul7313 <paul7313@yahoo. |
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From: Meuter Gisbert <gismeu@gmail.
Date: Mon, Jan 26, 2009 at 1:06 PM
To: OptionClub@yahoogro
I would NOT do it within the first 3 years of option trading!!!
Too risky and you can always hand over your money
to others later :)
gis
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From: Greg Farber <gregfarber@gmail.
Date: Mon, Jan 26, 2009 at 1:15 PM
To: OptionClub@yahoogro
Paul: I recommend you read a few books on the subject. My favorite ( so far ) is "Put Options" by Jeffrey Cohen. I wouldn't follow it like "the bible," but it gives a pretty fair introduction to the topic of selling naked puts (he also preaches a loss-reduction policy of adding a protective long put).
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From: Salvatore Enrico Indiogine <hindiogine@gmail.
Date: Mon, Jan 26, 2009 at 12:28 PM
To: OptionClub@yahoogro
Greetings!
Options are priced fairly. So it does not matter what you do, you canbuy, sell, spread, whatever, in the long run your profits and losses
will cancel each other out.
So, you need an edge. Most people try to (1) predict the future, (2)
skillfully adjust/exit their positions. (1) and (2) can be done if
you are careful, timely and knowledgeable.
I do not consider myself able to do (1) and/or (2) efficiently enough.
I have come up with edge (3): suck it up. That is, accept PUT and
CALL assignments.
A. I will sell a covered CALL _only_ when its strike is above my
average cost of the stock. Thus, I am guaranteed a profit. I
NEVER, NEVER, NEVER sell a naked CALL. I will not even sell a CALL
credit (bear) spread. This period I am thus not selling any covered
calls. Since my portfolio is only comprised of dividend paying stock,
I still make money. My net liquidation value is going down, but I
still get cash and use the low prices of stocks to buy more of them
using B.
B. I am so paranoid that I will not even sell naked PUTs anymore. I
will buy a diagonal PUT spread so that if the short PUT goes ITM I
will simply be assigned or sell the spread at a profit. If I am
assigned then I will have my long PUT in place and thus have a Married
PUT with a profit locked in.
The only problem with strategy B is that it looses in a bull market.
I will have to roll-up my PUT diagonal spreads. However, the cost of
the roll-up will be offset by the profits in my long stock positions.
This will not make me rich quickly, but it will minimize my losses and
allow me to receive income by collecting premium and dividends.
At least that is my plan. Any corrections and/or suggestions are welcome.
Bottom line: (1) NO naked put selling + (2) NO naked call selling.
However, thinks that it is easy to make money with Options does not
understand statistics and will get burned by the "most options expire
worthless" fallacy.
Enrico
--
Enrico Indiogine
Mathematics Education
Texas A&M University
Email: hindiogine@gmail.
Skype: hindiogine
Website: http://www.coe.
"On ne voit bien qu'avec le coeur. L'essentiel est invisible pour les yeux."
Saint-Exupéry
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From: Bill S <bdstrayer@yahoo.
Date: Mon, Jan 26, 2009 at 2:16 PM
To: OptionClub@yahoogro
Bill
From: Greg Farber <gregfarber@gmail.
To: OptionClub@yahoogro
Sent: Monday, January 26, 2009 10:15:16 AM
Subject: Re: [TheOptionClub.
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From: doylegroup_2000 <doylegroup_2000@
Date: Mon, Jan 26, 2009 at 12:12 PM
To: OptionClub@yahoogro
Hey Paul - I have used "naked" puts to establish a stock position of
a company who's stock I wanted to own. You need a margin account to
do these trades but I would have all of the cash required to buy the
stock in my account. I usually would sell 1 strike OTM, if put the
stock I would sell Covered Calls against the stock. If I didn't get
the stock I would decide if I still wanted to own the stock, if so
write another put and keep collecting the premium. With the higher
volitility these days its not hard to realize 3-5% per month. As far
as "naked calls" most people don't have an account large enough to
make these trade..I know I don't. I personally don't like undefined
risk trades. I would agree with James that spread trades allow you to
limit risk with very nice returns. Hope this helps. David
> From: paul7313 <paul7313@...>
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From: HopTrader <hoptrader@visinar.
Date: Mon, Jan 26, 2009 at 1:45 PM
To: OptionClub@yahoogro
I bought the book and it does a good job introducing stocks and options but after that you start reading proprietary methods (naked anything is not recommended, period.) that as a 2-day (spent a lot of money) attendee I can tell you have been modified since the authoring of that book. For the money, look into Larry McMillan's books and read those instead.
Rob
From: OptionClub@yahoogro
Sent: Monday, January 26, 2009 2:15 PM
To: OptionClub@yahoogro
Subject: Re: [TheOptionClub.
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From: Greg Farber <gregfarber@gmail.
Date: Mon, Jan 26, 2009 at 3:16 PM
To: OptionClub@yahoogro
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From: Paul Seifert <paulseifert@
Date: Mon, Jan 26, 2009 at 3:54 PM
To: OptionClub@yahoogro
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From: Joey Huckabee <trading.ocyg@
Date: Mon, Jan 26, 2009 at 4:59 PM
To: OptionClub@yahoogro
You do not have to have a margin account to sell puts. I have an IRA with interactive brokers which is a cash account, and I do cash-covered puts which are sort of the same thing except you have to put up the cash for the margin requirements.
Joey
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From: J. Harper <justin.harper@
Date: Tue, Jan 27, 2009 at 9:09 PM
To: OptionClub@yahoogro
A few points on this post:
1. As already pointed out by Paul, selling puts are technically not undefined risk. But since none of us here probably buy stocks with the expectation of losing 100% of our money (if you are…perhaps you should try a different game) that lower limit will hardly ever come into play except in the worst cases.
2. Enrico makes the point that he refuses to sell naked puts, but he likes to write covered calls. Most people should be scratching their head at this point. As pointed out earlier, they are the exact same thing, only one requires less capital. However, he also points out that he owns only dividend paying stocks. This is one of the few situations where it might make sense to sell a call with stock rather than just sell a put- he still collects the dividend (although regular dividends are usually built into the put price already; special dividends are not, and are not always adjusted if they're small enough). He still owns the stock the next month (assuming no assignment). He also will capture any change in dividends…for better or worse.
J. Harper
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From: Vikas Basantani <vikas.basantani@
Date: Tue, Jan 27, 2009 at 11:38 PM
To: OptionClub@yahoogro
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From: bben1006 <bben1006@yahoo.
Date: Wed, Jan 28, 2009 at 5:16 AM
To: OptionClub@yahoogro
On your second point--why do you think that the price of the put does
not reflect it already?
Ben
--- In OptionClub@yahoogro
wrote:
>
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From: rvd <rvdidit@yahoo.
Date: Wed, Jan 28, 2009 at 6:29 AM
To: OptionClub@yahoogro
See comments below.
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From: Randy Harmelink <rharmelink@gmail.
Date: Tue, Jan 27, 2009 at 11:49 PM
To: OptionClub@yahoogro
Then how about short puts or covered calls on inverse ETF's?
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From: Tom Mosher <inertia.trader@
Date: Wed, Jan 28, 2009 at 10:25 AM
To: OptionClub@yahoogro
.![]()
Maybe as a short-term trade. I would not use short puts to accumulate a long-term
position in an inverse ETF, though. Inverse ETFs are poor long-term investments,
even in a down market.
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From: dkomie <dkomie@yahoo.
Date: Wed, Jan 28, 2009 at 11:36 PM
To: OptionClub@yahoogro
If you write way out of the money naked puts, which I recommend in
this market, the margin requirements are quite low which gives you a
nice return on margin. Trading the highest quality issues in this way
is very conservative in my opinion. For example, I've recently traded
PG 45's and WMT 40's which in all likelihood will expire worthless
since the stocks are trading at 57 and 49 respectively. I think this
method of trading is very underrated. You can check out all of my
trades at: http://optionpremiu
> From: paul7313 <paul7313@...>
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From: Ricky Jimenez <rickyjim@bestweb.
Date: Thu, Jan 29, 2009 at 9:47 AM
To: OptionClub@yahoogro
Anybody know of studies of what choice of strike (how much in or out
of the money) and time to expiration is best for naked puts? I just
guess and usually go for the highest IV, but I wonder if there is a
more scientific way.
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