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Strategies & Market Trends : Advanced Option Strategies
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To: RBane who wrote (187)1/12/1999 6:16:00 PM
From: Greg Higgins   of 355
 
RBane writes:
Shorting options is an entirely different matter.
Whether you are shorting calls or puts, you can "always" recover by rolling out. If you have the collateral and you can stand the stress, you can always roll to a strike price that eventually will cause your option to expire worthless.

The key here is the phrase: If you have the collateral. If you have the collateral, the very best strategy is to always short. But be sure you know what enough collateral is. For example, how much collateral would you need to roll up and out of selling say a half dozen YHOO calls naked at roughly 140 before the split? If you rolled up an out to say the 2000 200's, you'd currently need about $700K in collateral.

Remember, if you're paper trading to be sure to update your collateral requirements everyday, otherwise you might fool yourself into thinking you can with stand a few naked call writes.
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