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Old Aug 23rd, 2012, 02:15 AM   #37
danshirley
 
 
Join Date: Jul 2004
Posts: 415
This thread seems to be about animals and disgusting homosexual references.

Is that the best you can do????

Don't you wonder about the maturity and general mental health of someone whose mind spontaneously turns to such things.
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Old Aug 23rd, 2012, 01:50 PM   #38
iceman1
 
 
Join Date: Oct 2002
Location: Chicago
Posts: 4,266
Quote:
Quote from Put_Master:

I'm not making any moves that would crash an account.


Just curious... how can you claim that selling naked options cannot "crash" an account... I've been doing this since 1990s and I can tell you the most lost was the result of selling naked puts/calls.

Is there something different or special about your naked put selling strategy that insulates you from black swan etc.
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Old Aug 23rd, 2012, 04:22 PM   #39
TskTsk
 
 
Join Date: Dec 2011
Posts: 629
Wheter or not naked put selling can "crash" an account depends on your spesific strategy. if you just sell naked puts randomly and let them run to total losses without any adjustments in case of touch, then yeah your account will probably crash. But thats' not the put selling that does, its you being stupid about money management.
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Old Aug 23rd, 2012, 05:15 PM   #40
Put_Master
 
 
Join Date: May 2009
Posts: 1,027
<<< Just curious... how can you claim that selling naked options cannot "crash" an account...I've been doing this since 1990s and I can tell you the most lost was the result of selling naked puts/calls. Is there something different or special about your naked put selling strategy that insulates you from black swan etc. >>>


Iceman, I believe you accidentally took that one single sentence out of context of my post, which I reposted below.
I was NOT talking about selling naked puts or naked calls. It was actually a discussion about credit spreads.
If you read my response below AND the post from Danshirley to which I was responding, you will better understand the "context" of my statement.

That being Dan was responding to my "hypothetical" $100,000 account I set up for his credit spread strategy.
He accused me of setting up 5 spread examples in the hypothetical account, which "HE" said was designed to deliberately.... "crash the account", per the moves I made in potentially managing them during difficult times.
The quote of mine you are responding to, was merely me responding to Dan's accusation, telling him I did not make any moves that would crash an account.

Again, the discussion was about being invested in credit spreads. Not naked puts or naked calls. I believe a strategy of having 100% of ones cash invested in a credit spread strategy, can indeed cash an account. That hypothetical $100,000 account, can go to a "zero net worth" faster than most spread traders realize. WHY?

Because in the very reasonable example I used, of spreads with strikes from $30 - $70, with the 100,000 equally distributed, it would cost the investor ONE MILLION DOLLARS to buy them all, and he only had $100,000. Thus his only choice for "risk managment", was to close for a loss.
And if he waited until the stocks were at or below his lower strikes.... his account would be worth next to nothing, Wiped out.
(I used 5 stocks in my example. But it would make no difference if 25 stocks were used.)

If he instead closed with the stock right in the middle of his 2 strikes, the account would still lose MORE THAN half it's value. The full "context" of my response to Dan is below:


Quote:
Quote from Put_Master:

I'm not making any moves that would crash an account.
All I did was set up a 5 stock, 5 gap spread portfolio, within a $100,000 account. I then asked you 2 simple questions which you refused to answer.
When you say your broker will NEVER take the stock, you are correct. Because he can't. You don't have the choice.
If your spread is violated by a few pennies, you seem to think your puny credit will cover it.
WRONG. Not even close.

Between your stock dropping, IV rising, and time decay being of no help to you, because of your several month long contracts, and your stock now trading ITM,..... your losses will be a lot more significant than you think.
In addition, the wider your strike gap, the less help it is when closing down a spread trade. And most of your gaps are 5 point gaps.
THe more narrow your strike gap, the less damage is done when closing for a loss.

Those deep OTM cushions you have, exist only in theory.
If you dare risk waiting for the stock to trade between your strikes, before closing the trade down, you are in for a nasty surprise.
Even closing down close to your strike will be hurt more than you know.

Because I'm not on nearly the amount of leverage you are on via my naked puts, i can afford to buy and hold, collect dividends, sell covered calls,... if the stocks are put to me. It's nice to have that choice.
You have no choice. You must close your spread or risk being wiped out.
I'm not saying no one should sell spreads. All I'm saying is, be aware of the risks. Given your inability to answer my 2 simple questions, you are someone not fully aware of the risks.
Perhaps now you are.
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Old Aug 23rd, 2012, 08:36 PM   #41
Put_Master
 
 
Join Date: May 2009
Posts: 1,027
Quote:
Quote from TskTsk:

Wheter or not naked put selling can "crash" an account depends on your spesific strategy. if you just sell naked puts randomly and let them run to total losses without any adjustments in case of touch, then yeah your account will probably crash. But thats' not the put selling that does, its you being stupid about money management.
I think the TskTsk summary above states it perfectly.
If someone uses excessive leverage, if they invest in a stock at a price that is over valued, if they select prices that have shown no previous tech support, if they over concentrate their cash, if they don't diversify among stocks and sectors, if they don't manage risk by closing bad trades, if their main investment criteria is simply to invest in the "hot" or the "story" stock of the day, if they select stocks with massive debt, puny earnings, insider selling, ect.....
Then don't blame the strategy. Blame the moron implimenting it.

My issue with credit spreads is, even if you are NOT a moron,... because of the MASSIVE 10:1 or greater margin leverage you get to use free of charge, that ability promotes reckless behavior in undisciplined investors.
Most naked put investors, even if they are also reckless, are unlikely to use much more than 2:1 leverage..... as they leave some room for price fluctuations.
And 3:1 margin is barely even possible.
Compare the potential 2:1 naked put leverage, with the 10:1 or greater, via credit spreads.

Whether one uses a strategy of naked puts, credit spreads, or what ever,.... the problem is not the strategy. It's the potential moron implimenting it.
Taking a loss doesn't make you a moron, anymore than making a profit makes you a genius. Whether one is a moron or a genius is determined by how intelligently they set up their strategies, and how disciplined they are, when it's time to manage that risk.
And frankly, the best time to manage your risk, is before you need to. That being..... before you initiate the trade.
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Old Aug 24th, 2012, 01:28 AM   #42
webicknell
 
 
Join Date: Mar 2012
Location: Atlanta, GA
Posts: 59
Quote:
Quote from Put_Master:

I think the TskTsk summary above states it perfectly.
If someone uses excessive leverage, if they invest in a stock at a price that is over valued, if they select prices that have shown no previous tech support, if they over concentrate their cash, if they don't diversify among stocks and sectors, if they don't manage risk by closing bad trades, if their main investment criteria is simply to invest in the "hot" or the "story" stock of the day, if they select stocks with massive debt, puny earnings, insider selling, ect.....
Then don't blame the strategy. Blame the moron implimenting it.

My issue with credit spreads is, even if you are NOT a moron,... because of the MASSIVE 10:1 or greater margin leverage you get to use free of charge, that ability promotes reckless behavior in undisciplined investors.
Most naked put investors, even if they are also reckless, are unlikely to use much more than 2:1 leverage..... as they leave some room for price fluctuations.
And 3:1 margin is barely even possible.
Compare the potential 2:1 naked put leverage, with the 10:1 or greater, via credit spreads.

Whether one uses a strategy of naked puts, credit spreads, or what ever,.... the problem is not the strategy. It's the potential moron implimenting it.
Taking a loss doesn't make you a moron, anymore than making a profit makes you a genius. Whether one is a moron or a genius is determined by how intelligently they set up their strategies, and how disciplined they are, when it's time to manage that risk.
And frankly, the best time to manage your risk, is before you need to. That being..... before you initiate the trade.

Folks, I am now exclusively using credit spreads.... looking at other strategies and using a "play" to test.

I am focused on RUT and NDX and trade far OTM... delta of less then 5... no more then 45 days out.

I do plan adjustment strategies if certain levels are met... Delta of 20ish.

And I do watch them closely and piss off my wife by spending too much time watching CNBC.

Results have been very good (knock on wood)
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