How do holds work when selling naked options?

Discussion in 'Options' started by TWORIP, Dec 22, 2008.

  1. TWORIP

    TWORIP

    How do you determine the holds needed when selling naked options. I think you only need holds on one side (i sell both puts and calls). How would i figure this out (unleveraged)?
     
  2. drcha

    drcha

    Can you explain a bit about what you mean by holds? Do you refer to margin? And what instruments are you trading?
     
  3. I am unfamiliar with the term 'holds' but it sounds as it's the equivalent of a margin requirement: assets needed to 'hold' the position.

    The margin requirement can vary by broker and each provides rules on its web site. Here are the rules for InteractiveBrokers:

    "100% * option market value + maximum ((20% * underlying market value - out of the money amount), (10% * underlying market value), ($2.50 * multiplier * number of contracts)). 20% above is 15% for broad based index options. Short sale proceeds are applied to cash. Not allowed for IRA accounts."

    A reasonable broker requires margin on the put OR the call. Unreasonable brokers (Fidelity for one) equires margin on each side.

    Beware of naked options. Consider learning about selling option spreads.



    Mark
     
  4. TWORIP

    TWORIP

    Thanks guys. Yes i was reffering to margin requirments. I think i might try to quilify for portfolio margin and sell month out naked calls and puts on the spy and qqqq. If position goes against me i will just roll it. I use optionsxpress. I have been playing around in Virtual trade making consistant gains so far. Yes it looks like margin requirment is just on one side. On paper it looks like i can pull anywhere from 5% - 9% per month with 15% at risk(hypothetically). Looking foward to getting this going.
     
  5. MTE

    MTE

    Good luck pulling 80-180% per year consistently! And you are gonna need double the luck to not blow up if you want to use portfolio margining, which implies that you wanna leverage up your trades.



    And good luck with this too!
     
  6. how do you figure max risk is 15% if your selling naked calls/puts?


    Man, Taleb just keeps making more and more sense.....
     
  7. MTE

    MTE

    He just rolls them and the risk is capped at 15%.:D
     
  8. On paper, I figure that I'll own Manhattan is 2.3 years :)
     
  9. Corelio

    Corelio

    :p :p :p :p :p :p
     
  10. The trap has been set and it's well baited.

    You will begin with small size, collect 2-3 nice profits, decide 'this is really easy,' increase your size by taking advantage of portfolio margin and get blown away.

    Selling naked options is beyond foolish.

    Believing that 'rolling' is the solution is even more foolish.

    Believing that you - a newcomer to the options world - have discovered something that no one else has discovered, should be a warning, all by itself.

    Mark
     
    #10     Dec 29, 2008