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Strategies & Market Trends : The Options Box -- Ignore unavailable to you. Want to Upgrade?

To: bobkansas who wrote (9492)	2/9/2001 9:49:51 AM
From: hobo	Read Replies (2) \| Respond to of 10876

Good morning Bob, In reference to the strategy used by Mr. Ansbacher... I have been trading options (on equities), for a little over 2 years. i started selling covered calls and slowly i developed my strategies into selling naked calls. lately, i have integrated the selling of naked puts & calls, as you described. naked puts is a relative term, since brokers require that you have an "option requirement" which is essentially a cash reserve. so, they are "partially naked. ( if you hold no short position on the underlying is the main difference between naked and not.) by no means i am an expert, in fact I am glad to learn about Max Ansbacher's book, which I will be reading... I found a web site with some info on Mr. Ansbacher and will be reading it with attention. usafutures.com The principle behind the strategy of selling naked calls and puts is indeed to take advantage of time decay on the premium and I would also add to take advantage of high volatility stocks because their premiums will be on the high side. one needs to understand that to take full advantage of this condition, timing is very important. the idea is that the wild swings will provide you, (as time goes, and decays the premium), for exit points. You have to be patient and wait for the appropriate moments to arrive for you to take advantage of those moments. By no means is a risk free strategy. Remember that the profit is LIMITED to the premium received. yet the risk of loss has NO LIMIT. your timing has to be impeccable so as to provide you with a win/loss ratio that will be capable of supporting the possibility of heavy losses from time to time... and believe me they will be there. in my current positions, I feel that I jumped the gun as I am holding 3 naked put positions that will make me the "proud owner" of some stocks.. -GG- needless to say using margin under this strategy (particularly in equity positions --due to the high requirements) is not advisable. about 3 - 4 months ago, due to markets conditions, (or so the broker told me), the broker declared that they needed a larger equity on the margin account than the usual 35% and imposed a 50 % equity requirement on my account. at the time although i was using margin, i was NEVER near the 35 % level.... yet because they arbitrarily "raised the bar" to 50 % i had to scramble however i was able to cover the requirement. (this after the day before I had called him to ask if I could execute a "short strangle" sell a put and a call at the same time.... the broker said YES... and the next day, they called me telling me i had a huge margin call. unfair ? yes, but so is life. to make a long story short... i was able to cover... in any event, i was in the process of eliminating margin any way... this event simply accelerated it. at this time i hold NO margin whatsoever and funny thing is... the broker has reinstated my account to the 35 % equity requirement level. my point is that using this strategy it is absolutely imperative to use either little or no margin. So far, for me this strategy has worked. i will also say that the strategy is only a % of the total portfolio, i do own some companies that i have been accumulating over the years... on those i sell mostly covered calls... if they assign me... well so be it i won't mind. I see that Mr. Ansbacher executes this strategy mostly on futures... i feel i am not ready yet for futures, however, i am very interested in futures and index trading. at the time I am using the QQQ as a "learning vehicle".