Discussion about this post

User's avatar
Mary Waxer's avatar

Greg: I almost never comment, however, I am really concerned about this trade you mentioned.

You wrote: "I have decided to start aggressively selling puts." And mentioned SPY $405. I see them at like $0.13 to $0.14. If the market has a big blip or tanks, the amount of loss potential is staggering and most people, other then an expert like yourself, may not realize how very risky this could be. Someone not understanding fully, could literally wake up bankrupt with their brokerage having closed their position even if the market the next day partly or wholly recovered. The risks are staggering. I am just worried about you, but especially about anyone else who is less proficient who may not realize how they could be 'blown out' if the market makes a 'surprise' to the downside. And it could happen before they even have a chance to manage it, if the changes are deemed big enough by their brokerage to cover their position at usually the time where they are the most 'negative' financially. I will give an example: Someone sells 1,000 puts on 405 SPY June 15 and receives about $13,000. Market has a blip (bank failure, war, etc.) and SPY opens at 400, then your brokerage would show you as +$13000, and (I estimate) -$750,000. Since your account is so negative, they would have the 'right' to close out your position immediately (given the market can drop more) and you would then have zero position and owe them $737,000 due immediately! SPY could even recover an hour later and it would not matter. You would still owe that. (This would not happen if you had $737,000 sitting in account.) However, it is just a question of how much collateral you have sitting to cover a negative position immmediately available as to their willingness to wait to sell out your position(s). Your strategy worries me, however, I am much less experienced then you, so if you are able to succeed with these strategies long term I just hope G-d is always looking out for you. I always wish you the very best!

Expand full comment
SD's avatar

Brave man to sell naked PUTS which is bullish now.

I would only BUY PUTS in this environment especially since a down cycle is expected from now to mid July.

Expand full comment
23 more comments...

No posts