Please with options wisdom, please EXPLAIN.

Discussion in 'Options' started by ilovemilk, Oct 7, 2013.

  1. ilovemilk


    So in my quest in opening a brokerage account, I've encountered difficulty classifying that I want simple options trading account. Regular Calls and Puts, but i get options like covered calls, protective puts, naked call. Please explain how you would classify a simple put and call (naked call?). it's such a hassle opening a live account. Is a regular call a cash-covered call, I swear people who came up with this jargon are idiots.
  2. All the jargon makes sense once you start learning more about options. The first thing you need to know is that when it comes to options there are only calls and puts so all the combinations and lingo are made of buying (long) or selling (short) calls, puts or a combination of calls and puts.

    From you post I assume that would like to buy options and this should require no margin and is a defined risk trade. (Defined risk means your risk is known at the time you place the trade and cannot get any larger).

    A naked call or naked option of any kind is when you sell an option and have no other option or underlying to define your risk. You are "naked" because you have unlimited risk, exposed to the elements as if you were naked in an Alaskan winter wilderness. I don't know what options are for the brokerage account opening but you don't sound like you are planning to sell options so no naked strategies or cash covered strategies (cash covered means pledge the cash to cover potential losses on a short option position).

    Hope this helps.
  3. djack


    just tick the highest level for options trading. it covers all including naked options .
  4. Bry


    you want "level two" to simply buy calls and puts
    level one is even less risky, selling covered calls or cash-secured puts
    yeah, don't go for higher levels, you might accidentally sell naked options and get into trouble; but I doubt a brokerage would approve you for the higher levels