Crash n burn/Jahajee hedges $8k in garbage puts with big SP futures. It's utterly moronic and serves no purpose other than to make the hedge the primary trade. You have to be a special breed of stupid to attempt it. He sold 20 SPX Oct par puts at 3.85 and hedged with one SPU8 [Sep hedge?]. The premium represents <31 points in the big SP. http://www.elitetrader.com/vb/showthread.php?s=&postid=2069874#post2069874
As one poster said this rolling forward is like doubling down. It works great till, well the spuz drop 100 points in week. I would love to see their p & l at the end of the month.
1) You should try a new BOOK 2) A covered call is exactly equivalent to a cash-secured naked put, when the strike prices and expiration date are the same. 3) Naked put sales (cash-secured or otherwise) are still okay. But they should be used ONLY by investors who WANT to accumulate stocks at prices lower than current. Traders should exercise due caution by selling put spreads, rather than naked puts. (Or call spreads, rather than naked calls.) The added safety is worth accepting a reduced profit potential. Mark http://blog.mdwoptions.com/options_for_rookies/
HAHAHA Good one, one of my all time favorite movie scenes. "Is it safe?" "What?" <object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/dG5Qk-jB0D4&hl=en&fs=1"></param><param name="allowFullScreen" value="true"></param><embed src="http://www.youtube.com/v/dG5Qk-jB0D4&hl=en&fs=1" type="application/x-shockwave-flash" allowfullscreen="true" width="425" height="344"></embed></object>
Hi Coach, No one ever said that writing covered calls was a complete hedge. But it does fit the definition of a hedge. Writing the call partially offsets the risk of holding another position. Obviously it's minor protection, but for an individual investor who is first learning about options, I believe it's a good <i>introduction</i> to learning how to use options to hedge a position. Mark
the game is: gather enough money to open shop. sell OTM puts and cash in fees. after 6, 12, 24 months you will eventually lose all client money. then gather enough money to open shop ... i am afraid it is that simple.
Well your post is exactly what the popular literature I was refering to says. Still they are not good hedges in my book.