What on the world are you talking about?? Selling a put is 100 percent risk equivalent to buy writing..Reversal Conversion 101
Correct. If I do sell a call - say, as a defensive strategy against a put that's really tanked - I'm also going to buy a cheap call at the same time. At this point, it's pretty much a spinal reflex. Yeah, no portfolio margin. I suppose Reg T gives me enough slack that I could go over notional by quite a bit relatively safely, but I just don't feel like playing with margin if the market tanks. As part of my risk management, I always have a few cheap back ratios running, so I have some protection against it - but I'm still in the process of figuring out the whole picture, feeling my way for what I find reasonable vs. too risky. If I see high vol, I'm going balls to the wall selling puts and collecting those juicy premiums. Still keeping it to 100% of notional - I think I've gone as high as 110% at one point, just because MSFT looked so good that I couldn't resist. No condors for me anymore - they move way too slowly. As to flys, I really like the idea; in fact, if I could master them, I believe they'd make up a very effective part of trading for me. But I'm not there yet, nor making a whole lot of progress on them. Learning directional trading seems to be the big sticking point, and that's a tough one.
I agree. The only caveat is that you can leverage higher with naked puts because of margin allowances. And you most definitely CAN get wiped out doing Buy-Writes. Just leverage up 3X (normal margin) and watch the stock tank by 30% plus premium. BOOM wipe-out. With Naked puts, the margin rules require you to have sufficient margin to cover a 20% move in the stock (I think that's right, but brokers can increase it). If you're selling OTM puts at 15% from Stock Price, that only requires margin of 5% of stock price. If you're fully margined, then the stock only needs a 20% + premium move and you're zeroed. You're not allowed to margin a CC that much. But that's not a genuine risk inherent to the position, only to the trader's ability to size up. If the position sizes are equivalent number of options between the CC and Naked Put, then outcome is the same. Yes, basic synthetics. One case that I'm not clear on is massive vol increase. I know that expiry outcomes are the same, but I'm not certain that the two positions are equivalent throughout a trade. Though they're probably close. Another variable is a big dividend pre-expiry.
Off the top of my head,there may be a discrepancy if a stock becomes impossible to borrow with buy in risk(massive borrow cost,I.e 80 percent)
I also sold a naked NIO option last week. It cost about $2K of margin per contract naked. It's a very popular strategy but you need to sell the right strike price so there's a low probability that it will hit your level.