Comments on: Sold New BNI Naked Puts – Covered NVDA Puts http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/ Investing in Stocks Through Options Tue, 24 Aug 2010 11:21:08 -0400 http://wordpress.org/?v=2.9.2 hourly 1 By: Alex Fotopoulos http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4120 Alex Fotopoulos Thu, 07 Aug 2008 10:47:36 +0000 http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4120 True about diversification - I go big (relative % to my total account value) into different positions, but not so big that a wipe out of one equity would kill me. I do hold larger positions than most investors who consider themselves diversified. I believe I tend to generate alpha because I allow myself to sell naked puts on more underlying value than I can afford to own all at once. It increases downside risk too, but I've been able to manage that for the past few years. True about diversification – I go big (relative % to my total account value) into different positions, but not so big that a wipe out of one equity would kill me. I do hold larger positions than most investors who consider themselves diversified. I believe I tend to generate alpha because I allow myself to sell naked puts on more underlying value than I can afford to own all at once. It increases downside risk too, but I’ve been able to manage that for the past few years.

]]> By: Options Strategery http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4116 Options Strategery Thu, 07 Aug 2008 02:15:49 +0000 http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4116 If you believe that you generate alpha then over-diversification is your enemy. Company specific risk is what makes you the money. That being said, there's a lesson in position sizing that you should not let any one of your positions kill you. If you believe that you generate alpha then over-diversification is your enemy. Company specific risk is what makes you the money. That being said, there’s a lesson in position sizing that you should not let any one of your positions kill you.

]]> By: kadena http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4104 kadena Wed, 06 Aug 2008 03:54:17 +0000 http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4104 my 2 cents, sorry for the NVDA losses, 1 less stock to consider can't hurt anything. i don't know alot about etf's, but tend to feel anti-etf, much like mutual funds. if we learn to hedge our stock plays, there is much less risk, how? i don't know, but i've started some vertical spreads, and find comfort in high % return possibilities and time management and money management that the spreads "assist" me in.... don't misunderstand, i got burned in 2007 on a couple stocks, but could have held, and still had some cash, and also had to many eggs in the basket, so i've been forced to find a way to hedge my bets, but i refuse to give up 'dreaming' of high % returns in stocks and options, so maybe eventually i'd look at the etf world, but currently that is not what i have to do. my 2 cents, sorry for the NVDA losses, 1 less stock to consider can’t hurt anything. i don’t know alot about etf’s, but tend to feel anti-etf, much like mutual funds. if we learn to hedge our stock plays, there is much less risk, how? i don’t know, but i’ve started some vertical spreads, and find comfort in high % return possibilities and time management and money management that the spreads “assist” me in…. don’t misunderstand, i got burned in 2007 on a couple stocks, but could have held, and still had some cash, and also had to many eggs in the basket, so i’ve been forced to find a way to hedge my bets, but i refuse to give up ‘dreaming’ of high % returns in stocks and options, so maybe eventually i’d look at the etf world, but currently that is not what i have to do.

]]> By: mule65 http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4096 mule65 Tue, 05 Aug 2008 19:49:29 +0000 http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4096 !Herbert- If you think the inverse ETF's "have no future" then you could short them or sell naked calls. IMHO, the short ETF's used with Options are a great way to hedge a mostly long portfolio and a 2X leveraged ETF like UYG is great in an IRA. !Herbert- If you think the inverse ETF’s “have no future” then you could short them or sell naked calls. IMHO, the short ETF’s used with Options are a great way to hedge a mostly long portfolio and a 2X leveraged ETF like UYG is great in an IRA.

]]> By: Options Strategery http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4088 Options Strategery Tue, 05 Aug 2008 07:45:55 +0000 http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4088 That's the problem with being long theta and short gamma. The black swans kill you. I don't think you should ignore stocks just because you've been burned. That's going to reduce your investment universe for no good reason. It might be worthwhile to change the thesis though. That’s the problem with being long theta and short gamma. The black swans kill you. I don’t think you should ignore stocks just because you’ve been burned. That’s going to reduce your investment universe for no good reason. It might be worthwhile to change the thesis though.

]]> By: vikas http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4086 vikas Tue, 05 Aug 2008 03:51:56 +0000 http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4086 I agree with mule65 on shifting from stocks towards ETFs. However, as they say, there is no free lunch. The premium you can collect on ETFs by selling naked puts or covered calls is usually less than what you can collect on individual stocks. So at the end of the day, it really boils down to your own risk appetite and that should help you decide if you should go for ETFs or individual stocks. Just my opinion... Cheers Vikas I agree with mule65 on shifting from stocks towards ETFs.
However, as they say, there is no free lunch. The premium you can collect on ETFs by selling naked puts or covered calls is usually less than what you can collect on individual stocks.

So at the end of the day, it really boils down to your own risk appetite and that should help you decide if you should go for ETFs or individual stocks.

Just my opinion…

Cheers
Vikas

]]> By: I_Am_Not_Herbert http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4084 I_Am_Not_Herbert Tue, 05 Aug 2008 02:42:20 +0000 http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4084 The same thing happened to me with WB. I'm still sitting on paper losses from getting 4 Puts assigned at $22.50. While I think WB will recover, it might be a while. Thankfully, I can hold the position, but it is still painful. I see what mule65 is saying, and I'm still evaluating a Put strategy that I'm comfortable with. But I have to disagree with selling Puts on short ETFs like DXD. It seems that short ETFs have no long term future. They may be good for capturing current conditions, but can't possibly (unless I'm overlooking something) creep ever skyward. This removes the possibility of rolling over ITM options on expiration date. With DIA though, there's pretty much a 100% guarantee that, over time, the DOW will end up. Thus, if you are ITM on a DIA Put at expiration, you know that you can keep rolling it over to eventually capture the upside, all the while capturing time premium. Take a look at today's DIA options. You can sell August 111 DIA's for potentially $1.09. Thus, two weeks before expiration, you're still able to capture a time premium of 1% (14% cumulative annually). Or you can start a 6 week cycle, and sell the Sept. 111's at $2.73. So yes, I'm tending to agree that ETFs might be safer than securities, but Long ETFs seem much safer than Short ETFs due to the almost 100% guarantee that rollovers will pay off sooner or later. The same thing happened to me with WB. I’m still sitting on paper losses from getting 4 Puts assigned at $22.50. While I think WB will recover, it might be a while. Thankfully, I can hold the position, but it is still painful.

I see what mule65 is saying, and I’m still evaluating a Put strategy that I’m comfortable with. But I have to disagree with selling Puts on short ETFs like DXD. It seems that short ETFs have no long term future. They may be good for capturing current conditions, but can’t possibly (unless I’m overlooking something) creep ever skyward. This removes the possibility of rolling over ITM options on expiration date. With DIA though, there’s pretty much a 100% guarantee that, over time, the DOW will end up. Thus, if you are ITM on a DIA Put at expiration, you know that you can keep rolling it over to eventually capture the upside, all the while capturing time premium.

Take a look at today’s DIA options. You can sell August 111 DIA’s for potentially $1.09. Thus, two weeks before expiration, you’re still able to capture a time premium of 1% (14% cumulative annually). Or you can start a 6 week cycle, and sell the Sept. 111’s at $2.73.

So yes, I’m tending to agree that ETFs might be safer than securities, but Long ETFs seem much safer than Short ETFs due to the almost 100% guarantee that rollovers will pay off sooner or later.

]]> By: Alex Fotopoulos http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4079 Alex Fotopoulos Mon, 04 Aug 2008 23:17:55 +0000 http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4079 While I can't agree with you about avoiding all stocks, I'm moving a little more towards ETFs too. USO is the only one I'm in now, but I've started eyeing more. Thanks for the additional list for further research Mule. While I can’t agree with you about avoiding all stocks, I’m moving a little more towards ETFs too. USO is the only one I’m in now, but I’ve started eyeing more. Thanks for the additional list for further research Mule.

]]> By: mule65 http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4078 mule65 Mon, 04 Aug 2008 21:10:17 +0000 http://mytradersjournal.com/stock-options/2008/08/02/sold-new-bni-naked-puts-covered-nvda-puts/#comment-4078 NVDA is another example why stocks should be avoided -- only ETF's. ANY stock can go bankrupt and/or tank 50% overnight -- who needs that? I have a few stocks that I'm working my way out of but anything new is an ETF, such as: UYG, DXD, IWM, TWM, XLE, EFA, EEM, etc... Plenty on option opportunity in that list. NVDA is another example why stocks should be avoided — only ETF’s. ANY stock can go bankrupt and/or tank 50% overnight — who needs that? I have a few stocks that I’m working my way out of but anything new is an ETF, such as: UYG, DXD, IWM, TWM, XLE, EFA, EEM, etc… Plenty on option opportunity in that list.

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