Buy a Call Option v Sell a Put Option

wtf

 

Isn't that what James Cordier did, and got blown out of the universe on NG? Selling naked puts? Were it not for that example, I'd think selling naked puts is the bees' knees. But then I see all the "naked" call buying going on since the latest bull run from March and think, "Why is call buying so horrible to some people?" BWS tries to explain this to me every time we speak on Skype, and I never get it, heh.

 

Cordier sold naked calls. Risk was unbounded. At least with NPs underlying can "only" go to zero.

 

Ahh, so he sold the naked calls, contracts got called away from him on the NG spike, and he didn't have enough cash to cover the calls?

Only lasting bit I recall of that episode was thinking that the NG spike was so abrupt, and renormalized so quickly, it was meant for one purpose...To put that guy out of business.

 

You profit when option price rises above more than how much you paid for it. That is very important to remember. Even if the price is above your strike price, but if the option price itself rises for less than how much you paid for the option, you will still lose.

You would choose to buy the call if you believe the underlying will rise a LOT, lot more than how much you have paid for the option and short the put if you don't. When the underlying rises a lot, the option price will go up lot higher and buying the option would give you higher profit and less risk. But if the price will not rise as much, you will profit for sure with shorting the option.

All depends on the future volatility of the price of the underlying.

 

Not only that he overtraded extensively by borrowing on margin so not only his clients lost all their capital but even owed money plus interest to the broker. It's his clients who lost everything and some. Cordier himself didn't lose a thing. He had s*** to begin with.

 

As long as naked I like it.

 

re: It’s clear
Take off your fogged up glasses.
Here is a reminder that I brought attention on this thread to the dangers of selling puts while you and others got bogged down in minutiae instead of looking out for an OP who was unfamiliar with the involved risk. After my post risk became the focal point of the thread.

 

im tired of you polluting threads with your condescending tone.

goodbye.

 

What's the difference selling a nake put and a cash secured put? Cash secured is you having the monies ready in case the stock is put to you. Nake put is?