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Traveller82

Naked Put Vs Credit Bear Spread on ESMini

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Dear readers,

I am selling naked put on EsMini. I know the risk involved into this strategy, used by collecting relatively low premiums untile a big loss take away all the small profits.

I sell 30-60 days maximum expiration and I stay from 13% to 15% lower from the strike price. This give me a safety margin in case of negative scenario.

In case the market reach the 9% I buy back the option and sell a lower strike at longer date to keep me away.

This strategy allow me to be far from being In the Money or close for 99% of the times. But after being successful for a while, I know realize I need a safer strategy.

15% difference in strike is huge but what happen if tomorrow for example another Lehman happens (like JPMorgan or Deutsche Bank just as example). As some experienced trader let me note, it will be difficult to roll down as everybody will be willing to buy PUT and prices will rocket.

 

The only way to protect myself is a credit spread. I attach a strategy I may use.

 

The question is: in case I sell 10 1850 PUT SEP. 16 for $3.00 and buy 10 1750 PUT SEP. 16 for $1.75 my maximum risk is $50,000 in case the index is below 1.750 and maximum profit is $625. The index should drop by -18.3%.

 

Is this strategy reasonable? Can anybody suggest how to improve money management?

 

Thank you

BEAR SPREAD.xls

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