I'll probably rarely if ever sell naked puts again. Once burned is enuf. With a very large account it can be worthwhile, otherwise you make much more $ position trading calls in this volatile market. It's not worth tying up the capital. I remember how terrified I was that I'd lose 2/3 my net worth in brokerage acct if the NAZ continued to tank--thankfully it recovered, I closed out a few put positions by buying back at ridiculous prices, was able to see others expire worthless, and then rolled out some JDSU puts which were Juen 100s and June 110s, when JDSU was in the 70's--roleld them out to leaps. As it turned out I should've held them and they too would have expired worthless but who knew, and it felt too risky. Now those leaps are worth half what I got paid but they still tie up a ton of margin and are deteriorating very slowly, so they're just sitting there tying up margin.
It is a strategy to be used very judiciously, and I think in this shaky market, with a lot of extra margin room, and have already all the cash needed WITHOUT margin to be put the stock. In such case it's useful. And if you can sell big lots of them I guess you can position trade them (sell 10 or 20 puts, for example, when CREE was 86, then buy them back for half when CREE rebounds). But again, you can make more $ buying calls in asuch a situation and you can only lose your investment. |
