I Sold Puts; Now What?

In response to Robert D’s questions on the forum, I’ve prepared the following video about writing naked puts.

{{{gold}}}

Hi Mark,
Could you please write few words how to trade and manage sold puts positions.
If possible something like:

1) how far from the money select a strike price
2) how to hedge position (either buying a put(s) with a higher strike price or selling vertical or diagonal put spreads)
3) when if at all adjust
4) allow assignment or buy it back
5) never sell them because of potential disaster if market crashes
6) how to add volatility in the process analysis
7) what events to look at like ex-dividends, quarterly reports, possible takeovers
8 ) what time frame (short, medium, long term)

Thanks,
Robert

There are now additional questions, so more information is coming.


Follow-up

I understand that the subject is really complex and there are no easy answers. I feel I need to add a bit of explanation. About two years ago I read a book about selling naked puts and covered calls, the rules were simple, sell naked puts, they should expire worthless at least every other time, once assigned start selling covered calls, the same as with puts, at least every other time they should expire worthless. If one does it many times the effective price one paid for the stock should eventually go to zero.

Today I do not think it is so easy. 2008 crash was not so long time ago, I heard about people selling naked puts and caught by surprise then. I would like to sell naked puts myself but I am not gonna do it without knowing what kind of hedging can protect me, did it once not knowing how to manage trade, it really hurt.

I am looking forward reading your posts regarding this subject.

Response available in what I believe is an important blog post.

4 Responses to “I Sold Puts; Now What?”


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