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Writing anything naked is really risky. If you're interested in writing and receiving premium, then sell call spreads. You're hedged that way and the margin required is much less. |
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I understand the risk that the stock could skyrocket up, you get assigned and have to buy the stock at e.g. 70 to sell it at 55, a loss of 1500 per contract. But who would be stupid enough to do that?
What do you think of this scenario?
When you sell a naked call you don't care which direction underlying goes. It goes down, that is great. It goes up, you buy the stock just below the strike price to cover. If price stays below strike at expiration, great. Then either sell stock or write covered call. At this point there are many strategies to employ.
Am I missing something?
Who would be foolish enough to not cover if the underlying was approaching the strike?
Any thoughts on this?