That's a good question, and one we can discuss very fruitfully, I think.
Taxman used to post on this thread about the dangers of naked puts. He pointed out that all you can lose on a call is your investment. But you can lose much more on naked puts. He was a bit intense about his viewpoint, but it has some merit.
I tended to be fairly conservative (or so I thought, LOL). I would sell below trading ranges, and leg into a position (as with SEBL, for instance, or JDSU). I liked the premiums and I tried to make sure there was ample margin capacity for volatility.
However, when the NAZ corrected so quickly and brutally, I was skating close to a margin call where I'd actually be forced to sell (on the web browser for Fidelity, my account entered house call territory on Friday and was out by Monday.). And I felt like I was peering over, maybe not the Grand Canyon, but the Taos Gorge, anyway. If the NAZ had continued in free-fall, and reached the nadirs the MDD thread so gleefully predicted (they're a great bear thread), I'd have had to sell much stuff under duress, at painful lows, and 93K here we come.
Looking at various strategies, I feel safer with, for instance, the NTAP Sept 55s. They skyrocketed in value, they deflated again, they're now profitable again but obviously not like NTAP at 200 presplit...nonetheless, by Sept, if I hold that long, they should be quite nice to exercise.
I guess the point I am making, and one which I have seen argued vociferously on other threads, is that whenever you use margin, you're using margin. Even when you use it as collateral to sell puts, you are consorting with the margin god. It can backfire.
I will also note something else: I have slapped my own hand for not watching the parabolic rise of the NAZ more closely. It had signalled a top about a week before the "crash." I get distracted by other life commitments & career stuff, and if I'd been watching more closely, I would've shifted positions.
How about you? I'd be very interested in hearing about your successful put positions and how they held up in recent times. |
