Option Selling Gains attention

In the past couple of days, this violent, volatile market has gained some adherents to the idea of selling options as a profitable investment idea.


Although I am in agreement, I want to be certain that readers of this blog who enter the action do not sell NAKED options.  I strongly recommend owning protecting by selling options spreads – if you decide to play.

NOTE:  If you play.  I am not suggesting this as a great idea if you are an options rookie.  At these times, the rookie can get his/her feet wet with a paper trading account.  But if you do decide option premium is so high that you want to sell some – please be aware of how much you can lose and do not get greedy.

Here are some relevant comments on the idea of selling options:

Adam, at Daily Options Report, mentions the idea of selling puts, or perhaps puts and calls.

Don, at Don Fishback's Market Update,refers to a Bloomberg.com article and goes on to say that he believes this is an excellent time to write deep in the money covered calls.  As readers of this blog may recall, that's equivalent to writing deep out of the money puts.

That Bloomberg article by Kearns and Gore talk about this being the best year ever for option traders.  But beware, those quoted may not be telling the whole story.

Options volume is soaring once again and last year's record volume will be left far behind.  As Jimmy Durante used to say "Everybody want's to get ‘inta da act.’

As I write this, SPX just dipped below 1000.  It's a dangerous world.  Be careful our there.


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