This article was originally published in The Option Strategist Newsletter Volume 15, No. 15 on August 10, 2006.
In the past couple of months, we’ve published several articles dealing with covered call writing and some of its companion strategies – naked put writing or put credit spread trading. Two issues ago, the feature article addressed some of the ways that potential bear market risk affects popular strategies, including covered writes. In addition, several of the Covered Writing articles (that usually appear on page 5) have discussed various aspects of naked put selling and credit spreading. We have also received a number of inquiries about these alternate strategies from current and potential money management clients. Therefore, we have compiled this article, which addresses all the aspects of these similar, yet distinct strategies – risk, reward, and suitability.