Gersh's Option trades Message Board

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Strategies & Market Trends : Gersh's Option trades

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To: Mark Johnson who wrote (617)	8/1/2007 11:25:24 PM
From: Mark Johnson	Read Replies (1) of 652

Gosh, Here is a perfect example of literally printing money from shorting naked options. The Dow Jones puts, Sept 35 puts, were bidding 75 cents on 7/30/2007, optionsxpress.com when the stock closed at about $51 and change. I missed this trade. Rumors hit the street that company may not get bought out, which created buy action on the puts. Even if the company was not bought out fair value would be about $35 per share for the company assuming no one would buy it out. Looking back the stock seems to be fairly valued in the $35 range assuming no earnings hiccups. finance.yahoo.com Worse case scenario is that the company would not be bought out, you would have been long the stock from shorting the puts, and then what you could do is literally write options calls on the stock until u get your money back. I would have thought that options would command a premium since it would have been possible that another suitor may step up to the plate and buy the company. Obviously, DJ will be bought out. In hind sight this was literally a trade that would print money for a brokerage account though. Writing naked options can be profitable if done correctly.

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