Is there a way to set a stop loss when writing naked options

Discussion in 'Options' started by lasner, Jan 21, 2010.

  1. lasner


    You guys are missing the point I'm going so far outside of the money. There is going to have to be a huge move just for the price of the option to double. You keep missing the point when the option doubles you exit or this case when the option triples you exit because you have the call option in the dollar.

    That's the most important point YOU HAVE TO EXIT.
    #11     Jan 25, 2010
  2. Well, that's different than old Vic who was selling near-the-money puts....naked. He got hit with two 6-sigma events and that did him in. In your case, you'll be hurt, but not dead.
    Remember, in six sigma events, no one gets their stops filled at the requested price. The price keeps moving against you until there is a liquid market again.
    #12     Jan 26, 2010
  3. lasner


    I'm writing very small options way outside of the money.....basically just generating small options of income. There is no way I'm crazy enough to write at the money naked options
    #13     Jan 26, 2010
  4. You're not going to like this, but the comments you've made thus far indicated you don't have a fraction of the experience or capital you would need to write a naked call correctly. I don't say this to be insulting, but rather in hopes that it will shock you and you will take the advice in this thread and re-think your strategy.

    Limit yourself to vertical spreads or walk away from uncovered calls entirely.
    #14     Jan 26, 2010
  5. lasner


    How so....I'm not being insulting either rather I'd like to learn. Right now I just wrote a naked 1500 call in june gold for $240...I'll exit when that becomes close to $750.

    I also wrote a naked 830 put for $300. I will exit this if it becomes worth $900.

    If the market rallies 150 points in a short time I will have to exit. If the market sells off 100 points in a short time I will have to exit.

    How can you say there is substantial risk in this. The markets have to make huge moves. It's one small option I'm writing. There is just as much risk in any of the other spread if not more.

    I'm not loading up and leveraging options. Please explain to me where the risk is
    #15     Jan 26, 2010
  6. Yes, the markets do have to make huge moves to hurt you badly. But they can and will do that from time to time in both directions.

    A good rule of thumb is that even a highly liquid market can move say 30% in the time it takes you to execute your order. These moves are caused by natural disasters, the outbreak of wars, major monetary policy shifts, massive bubble pops etc. Remember, we haven't seen the first real crash of the digital age yet - think about how fast the 1987 equities crash would happen today. I'd say about 30 seconds. Are you sure you'd get a fill ON AN OPTION TRADE in that time period? I bet you couldn't - no one would make a market for you. It would even be hard to get a stop filled on the underlying future in gold.

    Of course, if said bad shit happens on a weekend and GLOBEX is closed so they can dust the servers, there's a 0% chance you get a fill. Remember - pearl harbor was bombed on a Sunday.
    #16     Jan 26, 2010
  7. lasner


    And there probably is a better chance that I'll walk outside and get hit by a car. If you write safe conservative way out of the money calls or puts AND FOLLOW AN EXIT STRATEGY. You should be O.K.
    #17     Jan 26, 2010
  8. lasner


    What's the first real crash of the digital age
    #18     Jan 26, 2010
  9. An event akin in size to 1929 or 1987 executed fast enough that stops can't be filled.

    You just plain don't have enough respect for this stuff. You are NOT being conservative at all, and any talk of "exit strategy" is absurd, because if something really exciting happens you will not be able to exit your position. You will be wed to it until the market thickens up at a new price.
    #19     Jan 26, 2010
    #20     Jan 26, 2010