Whenever I do naked puts, I have already factored into my thinking that I'm going to buy the stock. If you are doing naked puts and not expecting to own the stock: my suggestion, don't do naked puts.
Given what I did Friday:
Sold 2 May 90 puts @ 22 1/2 - Should I have to buy the stock, my cost basis is $68, plenty of people paid that yesterday, and on a few other days. To hedge the position, if we get a pop after earnings, I could write 2 naked May 100 calls. This way I am buying my way into the calls on expiration if need be. Given the stock could pop after earnings, I might just by back the puts, and take the gain on a short-term basis. If I end up writing the calls and the stock really begins to tank, I let the whole thing ride to the end.
Worst case is if BRCM tanks. However, that is just as bad as if I had bought the stock yesterday at $68.
Yes, I do have access to real-time quotes. I can sleep at night knowing I might own Broadcom. FredE, since you are coming more from a shorts point-of-view, I could see where you wouldn't be taking this approach, but, thanks for the words of caution. Risk, I think, is a matter of perspective.
I'll probably end up owning 200 more shares and keep it for a long time. |
