Mark,
I am long SPY at about 121.50 and protected by long September 120 puts. I sold June 122 calls against the position to defray the cost of the long puts. I plan to sell additional calls in July and August to further reduce the cost. However, as SPY drops [it is currently 108], the premium on the 122 and 121 calls is diminishing to almost useless levels.

If I were to sell a lower struck call to collect a higher premium, like 115 or thereabouts, I risk a reversal in the market.

How do you suggest handling this set of circumstances?
CF

Thanks for the question. The discussion allows me to cover more than one of my favorite ‘philosophy of trading’ scenarios.

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Your opinion on selling naked puts. Both pro & con.

Thanks.
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I prefer to take the risk of boring you than to see anyone incur an unnecessary loss. Most options rules are obvious – once you learn the basics. But there are often exceptions or unusual situations.

It is all part of managing risk. It is very difficult to defend against any unknown risk – for the simple reason that the trader may not know the risk exists.
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