Covered call is a synthetic of the naked short put.
Covered call is a synthetic of the naked short put.
I doubt you read any of the books WayneL recommended, since that will be the first thing you learn.
Covered call is a synthetic of the naked short put.
I doubt you read any of the books WayneL recommended, since that will be the first thing you learn.
Yes, I read that, but I don't agree.
With a naked put your income is limited to the premium, while your downside risk is virtually unlimited.
With a covered call you have a lot more downside protection
Now, wayneL, I know you are saying this with tongue in cheek, but I do not regard myself as an expert in option pricing. But you ought to know, that a covered call with a strike price deep in the money offers a lot more downside protection than a naked put. Everybody who deals in options ought to know that and the point really doesn't have to be made over and over again.
In the monthly options cycle just completed, for instance, I used covered calls on AAPL on many occasions, both for weekly and monthly options. As you can see from the AAPL chart, all those trades were profitable, while some naked puts would not have been.
I have just checked my broker's account and the money is already in there. I am now getting ready for next week's trades and I think I might have a bit of TSLA.
Now, wayneL, I know you are saying this with tongue in cheek, but I do not regard myself as an expert in option pricing. But you ought to know, that a covered call with a strike price deep in the money offers a lot more downside protection than a naked put. Everybody who deals in options ought to know that and the point really doesn't have to be made over and over again.
Let's leave aside stop losses for a moment, can you please explain how a covered call has more downside protection that a short put?
...can you please explain the put-call equation as it relates to short puts and their corresponding covered call.
In particular, can you detail how the put-call parity equation is suspended in this particular instance.
With a naked put your income is limited to the premium, while your downside risk is virtually unlimited.
Yes, I read that, but I don't agree.
With a naked put your income is limited to the premium, while your downside risk is virtually unlimited.
With a covered call you have a lot more downside protection and with a stop loss in the right place you can significantly reduce your risk.
But you ought to know, that a covered call with a strike price deep in the money offers a lot more downside protection than a naked put. Everybody who deals in options ought to know that and the point really doesn't have to be made over and over again.
Dare to back your words and prove everyone here wrong ? I will even make a post on another forum of your choice if you are lazy, just let me know which forum. A few come to mind - bigmiketrading, trade2win, elitetrader...
...stop making a fool out of yourself and Daniel.
Cash covered put or cash secured putWith a naked put, if you have cash to fund the stock if you get exercised I believe it is called a "covered short put".
If you are happy to own the stock long-term, then this is not such a bad thing right?
Sure the price may continue to fall, but if it is doing so on short-term market sentiment rather than any fundamental changes to the business, then you just buy some more right?
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