Here you will find information and news about stock markets, online trading, investing, stock brokers. Great collection of tools for everyday trading, like real time stock quotes, interactive stock charts, options calculator, earnings calendar, market comments and suggetions for good reading material makes your trading day profitable!

Monday, August 01, 2005

Update: About Options Trading, Implied Volatility

Roger Nusbaum has also commented the Barron's Striking Price column:
This week's Striking Price column profiled a do-it-yourselfer who very successfully maintains an account with 10-12 positions of naked puts.

The article devoted a little space to the what can go wrong part of this strategy but I would have like to have seen a little more. I don't doubt the success of the investor profiled but the way the article was written it made it seem like he was taking a tremendous amount of risk by way of being over leveraged.

The downside of this is a drop in the market. If the market goes down by 3% a $500,000 account would go down in value by $15,000. That same $15,000 hit to a leveraged $100,000 portfolio is obviously a 15% hit.
This is quite much what I wanted to say. I don't doubt that it's possible to earn money by selling naked puts, but you really must be at home with options and trading. And you have to have a good money management to survive.

Read further:
Random Roger's Big Picture: Barron's And Naked Puts

See also:
About Options Trading, Implied Volatility

3 Comments:

Blogger Roger Nusbaum said...

One thing I did not mention is I do think there is a way to use this strategy.

Lets say an investor has a 10% cash allocation for a $500,000 portfolio. The investor might earn 2% interest on that cash. Selling a couple of puts here or there a few times a year that committed the investor to $30,000 or so worth of stock might be worth examining. What I have in mind strategically is effectively increasing the "interest rate" on the cash from 2% to maybe 5% or 6%.

In a given year the idea may or may not work but clearly this strategy would not be overleveraged. Thanks for the link to my site. Take care.

8/02/2005 09:42:00 AM  
Anonymous Anonymous said...

Hey, while searching for widgets for my blog, I stumbled upon www.widgetmate.com and wow! I found what I wanted. A cool news widget. My blog is now showing latest news with title, description and images. Took just few minutes to add. Awesome!

6/10/2007 05:36:00 AM  
Anonymous PENNY STOCKS said...

VIX is the best measuremant of volatility.

12/03/2012 02:51:00 PM  

Post a Comment   (feel free to post relevant comments)

<< Home