Selling Naked Options

Discussion in 'Options' started by OptionsTrader, Apr 15, 2004.

  1. ktm

    ktm

    Options Trader,

    Selling is the way to go...but I use the analogy that it is like flying a jet fighter plane. You need a great deal of preparation, training, skill and understanding of many things that cause you to blow up.

    As you can see, there are many stories here from those who were enamored with the friendly looking cockpit.

    I would suggest starting with other, more conservative strategies.
     
    #11     Apr 15, 2004
  2. Bob111

    Bob111

    i remember very good phrase from one of the options tread on ET-if you trade stocks profitably for good amount of years-then you may carefully start thinking about options. that it-no profits in stocks-forget about options. and i tend to agree with it.
     
    #12     Apr 15, 2004
  3. I appreciate your advice Ktm, I'm sure that is a risky game, but I think that be "naked" on a short "Index" option is less dangerous.
    First, is an Index, not a Stock
    Second, Italian Mib 30 is a low volatiliy/old economy index, therefore you can forecast short term movements more easy
     
    #13     Apr 15, 2004

  4. Yes, you will possibly win 80% of the time if you choose carefully... you may lose small on 19% of the rest... but it's that 1% of trades that can not only kill your account but ruin you...
     
    #14     Apr 15, 2004
  5. Bob111

    Bob111

    sorry to interupt you once again..but-one good loud explosion(hope it not going to hapend) in mardrid,milan,rome or whatever and YOU will be *naked*, along with your options..i did have such luck,when selling covered calls on friday before 9/11. good chunk of money left there..what you gonna do, if after been close for a week, market was open 800(?)pts below last close?
     
    #15     Apr 15, 2004
  6. Bob111:
    sorry to interupt you once again..but-one good loud explosion(hope it not going to hapend) in mardrid,milan,rome or whatever and YOU will be *naked*, along with your options..i did have such luck,when selling covered calls on friday before 9/11. good chunk of money left there..what you gonna do, if after been close for a week, market was open 800(?)pts below last close?


    And what about selling just calls?
     
    #16     Apr 15, 2004
  7. I was short gamma to the limit of my account into 9/11... neutral delta and lost 18%.
     
    #17     Apr 15, 2004
  8. nodelta

    nodelta



    Right arb.

    You guys fail to mention that a proper hedge strategy will lower your risk.

    The key is not to sell to the point where you'll run out of margin if the underlying moves aggressively towards your strike.

    That was my biggest mistake starting out. I sold more cars than I could get assigned on.

    Now I only sell cash secured and have had success on the short side.

    My biggest risk now is liquidity risk (i.e. not getting my hedge in).
     
    #18     Apr 15, 2004
  9. And you owe it all to...

    heh heh heh.

    :D
     
    #19     Apr 15, 2004
  10. lindq

    lindq

    You've received some good advice here to not sell naked - either puts or calls.

    Listen to the advice, and you will save yourself a lot of grief. You should also say thanks to those who took the time to share their experience, as painful as I am sure some of it was. They have done you a favor.
     
    #20     Apr 15, 2004