Ok, I'll skip the rest. Suffice it to say that shorting puts *is* virtually identical to covered calls except for commission charges, margin requirements, and some tax issues (all of which usually favor naked puts). The one thing you have to do though is be willing to let the put be exercised and buy the stock at the strike (or roll it out to another naked put). This is no different to being willing to hold your stock that you have long even if it drops.
You may feel emotionally more connected to the fact that you are losing money when the stock drops and the put value rises, but it is no different than when you own the stock and it falls.
Oh well.... in short, I don't agree, particularly in the risk issue, and the management of the positions.
Let's just say that we have different points of view, and that I tend to think in simpler terms, making money has been my objective, and believe me, this year it has been one unbelievable year for me....
Every morning I pinched myself to make sure I am not dreaming.
Using my "covered call" strategy has been key for a number of factors...
I have, and to this day, continue to study options, I do not consider myself an expert at all, but in my search for the "magic key to the Midas touch", so far the covered call is the closest i have come to it.
I am not saying that the naked put strategy is not (or could not be), profitable, I simply disagree in your view of being comparable to the covered call, (reasons already stated.)
And while I indicated that the net result in your comparison is correct, the risk considerations, are very different. Yes, it is true that the "unlimited" part is not quite accurate, as the stock can "only go to zero".... <G> (question is.... would you let that happen?)
At such point, I guess the definition of "unlimited" is somehow irrelevant since I would never let a loss slide to such levels, therefore, if we are going to nick pick, we should begin to define such views.... of course, I have no interest in doing such.
As for "feeling emotionally attached".... far from it, I view stocks as mules to pack (with profits), in the journey to money Nirvana....
One thing that "covered calls" have done for me, (which I will gladly continue to do), is the discipline to take profits.
This means, that once the strike price has been defined, (and provided the stock goes through it), then I let them call it away from me... yes, I know, you can "roll it out to the next month"... etc.
But then it becomes the same thing as before, (at least in my case), of allowing substantial profits to slip away as the stock retraces.
With the cc strategy, it defines the profit and I do not mind to sell while everyone is buying.... am I leaving money on the table? sure, but once again, the results so far have been extraordinary... so, why screw up a fine strategy with complicated and "sophisticated" strategies....
Besides, I will accept that "I am a simple man, who likes simple things" .... in spite of more than one person who I know, they disagree to this last statement.... <g> The above strategies, proves them wrong.... he he he he.., and believe me that is an added fringe benefit, that I am not about to let go of, regardless that such has nothing to do with money. he he he he he...
by the way.... I am not suggesting you ought to change your views, you are welcome to think as you do... that is what makes a market. |
