Traders Laboratory - View Single Post - Writing Naked Puts & Calls - Risks
View Single Post
  #16 (permalink)  
Old 03-11-2007, 08:18 PM
dalby dalby is offline
dalby has no status.

Trader Specs
 
Join Date: Feb 2007
Posts: 155
Thanks: 0
Thanked 1 Time in 1 Post
Re: Writing Naked Puts & Calls - Risks

the reality is that most options expire worthless, so at least on its face, selling premium would be higher probability than buying it.

however, the loss is unlimited when you sell premium (with calls)

options are great. i love them. but they are more complex than futures cause you have to understand time premium, volatility, etc. iow a lot more than merely direction.

in futures, you only have to be right about direction to make $$$. in options, it's different. you can also have NO idea about direction, but be right about volatility and still make money.

options are much more flexible than futures, too

and if you are right, and you take the options position with the max profit, you can and will make a much larger return than you would with the equivalent futures position.

for new traders, i don't recommend options. i think getting a grasp on price action, which will help you in all markets, is the first step.

Reply With Quote