Selling puts in an index is also risky. I suggest you <i>consider</i> selling put spreads instead of naked puts. If you are comfortable selling naked puts, then so be it. I know you will hate buying that OTM put for protection, but it does limit losses. I find it worth the high cost. Mark
A man can drown in a bowl of soup. Lesson: Always be careful, even if you don't think you're out of your depth.
First, thank Jebus GE implied's are up. Second, is there a problem with selling October vols ? I like a faster burn, close to the edge, down by the water (Yes). I'm bee-bopping all over Oct (collected 1.76 for the 17.5p-closed) and still short the 22p. I hold a chunk of GE shares down here and am very glad the options have lit up as of late. However, vols did come off after the Merrill downgrade and the mkt leaned on the options but they are still juicy. Thanks for the segway to rant about my GE... Remember the German trader who was said "I"s the man" in Natenberg's book? He blew up selling dotm's. One more thing, how the f++ck does Blodget still find work? It "felt" so good watching GE rally above 26 on the day of his negative review. He reduced GE the company to a mere hedge fund about to go bust. Cheers, Alex
agree, trades must be managed and the management must be planned before the trade is opened. trade management can range from the simple to the complex. when looking at risk/reward of a trade, also add in "recovery", if the trade goes way against you, what kind of recovery is possible?
Selling cash covered puts on stocks you really want to own at strike prices where you'd really be willing to own the stock is less dangerous than buying the stock at the current market price. Where people get in trouble is when they sell puts on margin for far more stock than they can actually afford to own or would want to own. As an income strategy this isn't particularly lucrative because the put premiums are tiny compared to the amount of cash you need to buy the stock. But if you just want to get paid for buying stock you want to own anyway it's a sensible thing to do. In fact if you really want the stock it sometimes makes sense to sell ITM puts. You are more likely to be put to the stock and you still get it a little cheaper than its current price because of the time value of the puts. And if the stock does go up beyond the strike price you at least get to keep a hefty premium.