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Strategies & Market Trends : Galapagos Islands
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To: habitrail who wrote (30482)3/4/2003 12:09:01 PM
From: Jorj X Mckie  Read Replies (1) of 57110
 
well, selling options naked (shorting puts and calls), is similar to shorting stocks. You really don't want the position to go against you.

If you short calls, you know what your upside potential is, but you don't know what your downside potential is. If you short calls and get caught in an October style squeeze, it can be very painful. Of course, buying the underlying stock will even the position out.

I prefer going long puts rather than shorting calls. The pros will short the calls. But they have a better view of what is going on and would be better at hedging the position.

I have never sold calls naked, only covered. I did however short puts back in the 90s. That was a nice income generator, but nothing like buying ITM CMGI calls the day before it went up 100pts (in two days).
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