Put Selling

Discussion in 'Options' started by chewbacca, Apr 8, 2008.

  1. Well said. I agree.
     
    #21     Apr 9, 2008
  2. You did not understand what was suggested to you: buy a put for each put you sell, so that you limit the loss if any.
     
    #22     Apr 9, 2008
  3. Hows that free money working out for you?
     
    #23     Apr 9, 2008
  4. my crystal ball shows the following..........

    op will get lucky a few months and think he's a pro.

    op then borrows from his credit card and family.

    op will leverage more and more.

    op blows up.
     
    #24     Apr 9, 2008
  5. We can't bog ourselves down with insignificant details like vol can we? :)
     
    #25     Apr 9, 2008
  6. getting nervous yet?
     
    #26     Apr 14, 2008
  7. I am not a big fan of bull put spreads. The "insurance" leg doesn't seem to offer much protection. For example, let's look at a recent trade: an ATM put from Thursday close going into Friday of last week. The ATM put was sold for $14.00, and an OTM put was bought for $7.00. The ATM put closed on Friday at $30.00, and the OTM put closed at $16.00. In one day, this spread widened and lost about $7.00 per spread. If the "insurance leg is closer to the ATM put's strike, then it tracks better. Yes, the insurance provides a stop loss, but still at a high price.
     
    #27     Apr 14, 2008
  8. Let me see if I got this straight. ATM put was sold for $14.00 on Thursday close versus the Put spread sold for $7.00.

    ON the close of Friday, according to your numbers, the ATM put closed at $30 for an unrealized loss of $16.00.

    On the close of Friday, according to your numbers, the Put Spread has an unrealized loss of $7.00.

    So you prefer the one day loss of $16.00 over the hedged position which losses only $7.00 for the same move.

    It is fine if you do but I am not sure you realized what you said.
     
    #28     Apr 14, 2008
  9. lindq

    lindq


    LOL! That's the story.
     
    #29     Apr 14, 2008
  10. RL8093

    RL8093

    Just noticed this thread & pulled up a chart. No real comment on your original premise. However, you should consider some additional chart work for your entries. At the time you entered the trade, there were a number of short-term bearish signals - which you either didn't see or decided to ignore. Doesn't seem like a good idea to start your trade from a hole ....

    R
     
    #30     Apr 14, 2008