Are naked puts really this safe????

LOL. Well there are a lot more knowledgeable people here than I that can hopefully answer your question.

All the best.

 

no. selling puts naked without leverage and holding to expiration has the same risk as being long the underlying.

 

Are they also assuming the options (or whatever derivative they are trading) are efficiently priced? If so, how would that work? Where is their edge?

 

It's not quite the same. Your opportunity cost is a whole lot of upside in return for a couple % a month. Over the long run, it can average out to be quite similar to holding the underlying but with less volty. Will slightly outperform in declining or stagnant markets, and will underperform in a rising market.

 

Like a covered call. Limited upside potential, fairly steep loss potential. A lot of people swear by covered calls and cash secured puts - their bread and butter. Some have done very well. To me, why not sell a put verticals? A little less return, if you're above the short strike; but a lot less risk than a put sale non leveraged or otherwise, as their is no long strike.

 

Equity investors are generally optimists, unlike bond investors. They see CCs as a high win rate into their bias. Anyone killing it with short puts is leaving a ton of money on the table.

 

option professionals sel premium in a trend or sideways market,this strategy can be very profitable or wipe you out,it's very dangerous if you are so/so at calling the market,best left to the pros,thier option knowledge allows them a lot of defense mechanisms,you know how to drive a car,would you compete in the indy 500 tommorrow

 

The difference is that short gamma can be deadly.

I can't remember a blowup due to buying options. No one loses it all at once long options, they fritter it away like Taleb at Empirica. And three quarters of the short gamma blowups seem to be on the OTM put side, not the call side, even though losses on the short put side are bounded.

 

very astute, synthetic and risk are different.

 

Even though a protective (married) put may end up leaving money on the table, remember there's no "free lunch". I understand that it's the same as buying a call; however, you have ownership of the asset vs. an option on an asset.

In your opinion, is it best to enter a married put (or long a call) before or after earnings? It's a question of Volatiliy crush vs. movement of the underlying asset...

thanks for your input...

Walt