vhehn, Selling covered calls is a lousy strategy, as is selling naked puts. Agree about the going oversize/overtrading..........been there, done that.
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Reminds me of the interview with the CEO of Marlboro, or maybe it was Dunhill, when they were asking him about the health issues and he replied, "Look, I only sell this shit I dont smoke it "
How about not going completely naked but also buying at the same time an option which is much further in the money? It costs a little bit performance but saves one from ruin. I must admit I didn't write an option yet, just thinking about it.
selling naked puts has the same or slightly less risk than going long the same underlying instrument provided you match your size to a worst case scenario. ie if you have enough money for 1000 shares of stock you sell no more than 10 options.
I'm sorry but this is complete BS Do guys know how to price an option? u may think downside risk on puts is finite as opposed to calls, but Implied volatility, the major variant in options pricing has no limit !
While there are problems with it also there is the possibility of hedging with futures when that fateful day comes. It is what I do when the iv's rise too quickly. After 9/11 the spreads on atm options were 15 points, futures came in very handy at that time.
what? if you sell 10 puts on msft the worst that can happen is you will own 1000 msft at the strike. same risk as being long the stock.