This article was originally published in The Option Strategist Newsletter Volume 7, No. 11 on June 11, 1998.
An option strategist is often faced with a difficult choice when it comes to selling (overpriced) options in a neutral manner -- i.e., “selling volatility”. Many traders don’t like to sell naked options – especially naked equity options – yet many forms of spreads designed to limit risk seem to force the strategist into a directional (bullish or bearish) strategy that he doesn’t really want.
This article was originally published in The Option Strategist Newsletter Volume 6, No. 2 on January 22, 1997.
In this article, we're going to take a look at the strategy of selling options. Just how profitable it is, and some of the considerations for naked selling or for using credit spreads. With option premiums inflated in many markets because of increased volatility, this seems like a timely topic. I'm not specifically including covered writing in this discussion, but since a covered call write is equivalent to selling a naked put, you can apply any of the commentary that pertains to naked put selling.
