Long stock + short put options: How is this strategy called?

Question? Are you Stock_blokes love child?

 

... just a little boost, yet don't want to get completely into options trading.

 

I still think selling OTM calls agaisnt your stock is a better play but that is just my opinion and there are others much better with options than me on here.

 

My thought is that you should rethink trading until you understand that short puts equal a long position. not being critical, just that it makes sense to fully understand the option concepts.


c

 

i said synthetic covered call (ratioed).

a naked put is a synthetic covered call. since besides the naked put, there is also long stock position involved, the overall position is a ratio synthetic covered call.

iow the position is syntetically equivalent to long stock and short a ratio of calls.

i dont understand the fuzz, this is a viable strategy, it entails long delta and short vega. probably is much better than any vol spreads or pure gamma scalping bet that carry extremely negative expectancy.

 

It's known as a "Confidence Spread". You're confident that the stock will go up and then you'll make money on both sides of the spread.

 

Yep, I know shorting puts is a bullish strategy...

... that also makes some money if the stock (ETF in my case) doesn't move, profiting from time value.

 

Just an example of how selling a naked put has the same "risk reward" as a covered write.

Assume stock is $40.

Assume both calls and puts are trading at $2.00

Buy stock at $40. Sell call for $2.00
Maximum profit is $2.00
Maximum loss is $38.00 (if stock goes to zero).

Sell naked $40 put.
Maximum profit = $2.00
Maximum loss is $38.00 (if stock goes to zero).

This is why Wade Cook's teachings were so flawed. Why pay interst to buy stock?

Collect $$ from put sale instead, save both interest and transaction cost.

Now, if you already have a stock (or ETF, whatever), then sure, why not sell some time premium.

FWIW,

Don

 

Long x spot and short x+n calls? No.

 

Funny you berate someone for not understanding options. Short puts do not equal a long stock position. For them to be the same, they would need to behave the same, which they don't.

For starters, a long stock position has unlimited upside, whereas a short put does not. Their risk graphs are entirely different.