is this a stupid idea?

Discussion in 'Options' started by scottyy11, Jun 10, 2008.

  1. scottyy11


    I have a covered call where i think the options are fairly certain to expire and not get exercised. The stock has low volatility. the options expire in about 8 trading days. Is it stupid to maybe write some naked calls now a little longer out to get a bit more time value?

    doesnt seem to be much risk but not sure 8 days would make.

  2. cdowis


    Sometimes the market is "irrational" and we get killed.

    I look very closely to risk reward when I place the trade. But that depends on your trading style == high risk vs conservative.
  3. TYtrader


    there are no stupid ideas.

    only stupid people. haha.

    just kidding.

    naked calls refers to selling options without a position in the stock or other hedge. so, are you talking about selling more options than is covered by the stock.

    if you want to sell more calls against your stock, you can close out the existing ones and then sell longer term ones. keep in mind that time decay affects short-term optins more than longer-term ones.
  4. magicz


    if iv is low otm call are pretty worthless with 8 days to exp. what are you trying to make? 100@.15?.10? thats not worth the risk if the naked calls IV jump on news or you have a big guy trying to push the stock. that my friend is how you blow out your account.
  5. Those that sold uncovered April GOOG calls 100 points OTM the week before expiration all have blown accounts. Probability (delta) was under 2%, but that's all it takes for an uncovered position to blow accounts. Risk management is the key to longevity in this game.

    selling uncovered calls = unlimited risk
  6. jd7419


    My wife works at JPM formerly BSC. One of the high net worth advisors who she dealt with had about 2 and half million worth of bsc stock as of the Friday close before the $2 price. He sold naked a ton of calls ( I don't know how many) that friday afternoon and walked in on monday with a losses of 4 million dollars. He had to sell off a bunch of assets to cover the losses and currently is not working. My wife thinks he might have had a nervous breakdown.
  7. TYtrader


    He must have sold puts, not calls because the stock was at $30 Friday and $2 Monday. Selling calls would have been a winner.
  8. jd7419


    Yes you are right. Thanks for the correction.
  9. Nickvac


    Naked calls can clean you out so quick. Including your house and car and wife and kids.