6 days remaining till May expiration currnetly looking for some trade ideas for June if anyone has they would like to discuss please post
When you sell naked, you make money 90% of the time and that 10% wipes out the profit. When you buy options, 90% of the time you lose money and that 10% covers your loss. Those 90% and 10% are just estimates. The other danger of selling naked is that after a few profitable trades, you get close to the strike price to get more money and then you know what happens.
the thing that ends more careers of selling naked puts is specific stock risk and leverage. you can reduce one of the big risks by selling only on indexes or etfs. an index is not going to 0. leverage you have control over. you sold puts on lulu. that is a mo mo story stock. you could easily wake up some morning 30% down with the right news.
If markets are efficient and follow BS. Which they do not. Take a look at this for instance: http://www.cboe.com/micro/put/ Naked put writing beats the S&P
there is a measure of risk envolved as there is in all trades I generally sell 10 to 15 postions a month far out of the money the LULU and the BA re closer than I like. I don't sell everythingl naked I sell some in vertical spreads as well
you are correct freethinker that could happen of course that could happen to any stock. I try and base my trades on the fundamentals and technicals at the time of the trade and look for where specfic support and resistance areas are. There is risk involed selling options is not everyones cup of tea
I sell naked put options on stocks I want to own and when I own them I sell covered calls... The stock criteria are high dividend stocks or 'value' stocks. Only selling cash, no margin... I shoot for 10% a year with this portfolio and strategy, but I have some results that where over 30%, 40% a year (not every year) in the last decade... No condors, no vertical spreads, just simple naked put selling and covered call selling...
We have had this discussion before. I know scalpers that do quite well. I know the big banks have a global dispersion model that works VERY well for the big guys. I know guys that use long side option strategies to take long or short positions. The traders that are my age and retired, sold premium. Not randomly. But their strategy was to look for selling opportunities. The guys that only buy straddles and delta hedge are fighting a difficult battle. Bob