rsn571

Some thoughts: "On paper" - things look much cleaner than in execution - which is part of the basis of the "whipsaw comment" in one of the replies. Selling naked calls a potentially unlimited liability. The moment you purchase the underlying the position becomes "covered". If you own positions and want to protect - you can buy out of the money puts to protect the downside. If you believe the positions may go up - but only to a certain point you can sell a call just above. (The call is covered because you own the position.) If the position does not reach that call strike price by the date then you keep the premium and the position. This can be done over and over in markets that smoothly rise. In rising markets the following strategy is more difficult. In choppy markets it works pretty well. in falling markets - you have to be careful not to exceed your ability to buy what is "put" to you. Selling puts, selling premium, selling insurance You define a basket of stocks that you would like to own - but at a lower price than what is currently being offered. You sell out of the money puts 1,2 months out - but not exceed your capability to buy/own every single stock behind he puts sold. In a choppy market, stock gets "put" to you over time. Each time it gets put to you - you can attempt to sell a "call" covered because you own the underlying and collect the premium on both sides (put and call) and any issued dividends while you own the stock. When the Vix is 18 - 25 this works pretty well. Note that you do not get all the trades you want - you have to mange things carefully. In an environment like now, VIX<15 it is difficult to get much premium going. Options can also help to "smooth out" abrupt trading behavior R