To put into perspective how badly this type of strategy can go, one of this monkey's trades was brought to my attention today. He wrote a 2009 $35 put in June 07, for $1.35 credit, on a stock trading at $65ish. In early November, with over a year to go before expiration, that option was at the money - the traditional signpost of "oh crap, better do something about this". According to my back-of-the-envelope calculations, the option was then worth $9.40 or more. So, already a 600% loss by the time the red flag went up. Rumour has it, he's still short those options, and the stock is at 21 now. That's why you want to play safe with these.