If any of you ever wondered why PC's are #1,
here is what happens when you trust a network!
Not very funny, and the very type of disaster that will kill
I have plans to never play naked calls. The reward to risk ratio is 0. Limited reward / Unlimited risk.
Have you heard of a book named "LEAPS" by Harrison Roth? It's the only book I own that deals with options. I find it very understandable (i.e. written for the beginner/novice). Dedicates a chapter each to the well-known options strategies.
Beethoven is right about naked calls. It doesn't get much riskier than that. Getting a margin call is NO FUN AT ALL.
You and Rach are also both correct on fees. Different brokerages have different rate structures. I actually pay lower commissions when I write calls than when I purchase equities.
It's one of the reasons I recommend doing lots of research before opening a brokerage account.
Take care (you communicate just fine).
Take some advise from an impartial source and listen
to Beethoven. He is mad at the piano, but sane on the
Messing with naked calls will leave you naked and
living in Tiajuana.
Play the game long and don't get sweet talked into
gambling by these housewives.
Just an Impartial Opinion.
Selling covered calls (you own the underlying security in quantity greater than or equal to the calls you sell) sometimes can be a useful strategy, but selling naked calls is akin to playing with a lit stick of dynamite. It is the stupidest form of investing unless you are a market maker (i.e. own a seat on the CBOE and trade professionally).
Why do I say that? Limited return (all you can make is the call premium) and unlimited risk. If you are short naked calls and the underlying stock jumps 10-20 points you can easily lose 5-10 times the amount of the call premium you collected.
Brokerage firms will require that you have a lot of assets, income, option trading experience, etc. before they even approve you to sell naked calls.
Do yourself a favor and don't take advice via the Internet from people like Rachimov who have been trading for a handful of
months and don't know what they don't know. Buy some good books on investing (The Motley Fool, Lowenstein's book on Warren Buffett,
Peter Lynch, etc.) and invest for the long term. I've been around the market a long time and I haven't seen anybody consistently
make money trading options. It's like playing in Vegas; over time the odds will eat you up. In option trading, the odds are (1)
the bid-ask spread, (2) commissions and (3) short term capital gains taxes on any profits you make.
"As you progress in your lessons
of humility - we shall fade."
Pretty arrogant message from someone preaching humility, wouldn't you say ?
Your own ignorance causes the fading away. Michael need do nothing to help nature take its course.
May be we're just mis-communicating.
I don't know how things work with your broker or Fidelity. But at Kennedy Cabot they don't care if you sell covered calls or
naked calls. The contract is identically the same. In both cases you have to provide the shares if they are called away. In the
covered case, you have the stock in your account. In the naked case, you must buy the shares (come up with the money to buy the
shares) at market when assigned. Notice that in both cases, the shares are called away - no need for two seperate contracts.
At KC commissions are as follows:
1 to 49 shares <$1 $2
50 or more shares <$1 $1.5
Minimum for any transaction $33
Doesn't matter if the contracts are covered or naked, buy or sell.
If you're broker is telling you different and/or charging you more and you are playing options, I would check out KC and pay commissions as outlined above.
I apologize for the name calling in previous posts. You seem nice and good intentioned.
And I apologize to the imposter if I come across brass and crass. I don't know any other way to communicate, but to say what I think and to attempt to be succinct.