TexasTrader

DALBY: Yes, I have done the same thing myself and it is a (very) good way to purchase stock. However, I would contend that when a naked put is used in this way you are not trading options but rather buying stock. Successful Trading, TexasTrader

Posting messages late at night on forums is what I get for drinking a cappuccino with dinner! The big advantage of trading options is leverage. You control much more stock with much less margin using options than you do by actually trading the underlyings. Also, calls and puts can be combined in many creative ways. More complicated option trades can make money if the underlying goes up, down or sideways. As far as I know, you can't do that if you own a stock (with owning an equity, you are betting that it will go up; if you short a stock, you are betting that it will go down; I don't know how to trade a stock that is moving sideways within a tight price channel). OK, Ambien, here I come.

In response to the question about "LO", there is no LO symbol at the options brokerage I use (thinkorswim). A good way to play crude oil (if you have the stomach for the volatility), is to write options against the OIH index (Oil Holders Index). It is a tracking index composed of companies with large crude oil interests. Be careful about placing long term option trades on OIH though because it is so very volatile and seasonal and sensitive to supply/demand and to terrorism and . . . News events of many kinds move OIH rapidly up and down. Here is an oldish link describing the OIH: Oil Service HOLDR (OIH) -- In in-depth look at this oil stock ETF Hope that is helpful.

If I may chime in . . . I am an experienced options trader. A naked call or a naked put is a very directional "bet" that a stock/index/ETF will move a certain distance or not move a certain distance in a specified period of time. I used to trade these especially just before expiration Friday. My thought process was what could go wrong in just a couple of days? As I found out, plenty can go wrong! I was once on the wrong side of a naked call and a separate naked put just before expiration and it cost me 10% of my account. It is very easy to mitigate the risk of a single call or single put by buying a slightly different strike for the same expiration. This is called a credit spread. While the reward is much less, the risk is MUCH more manageable. Credit spreads (either a pair of calls or a pair of puts) are easy to learn and to trade. You can manage the risk to near zero by buying your sold strike when it gets cheap enough before expiration. I buy the sold strike for volatile underlyings (GOOG, AAPL, RIMM, etc.). I don't bother for more stable underlyings (SPY, SPX, DIA, QQQQ, etc.). In sum, selling a naked call or a naked put is gambling. No amount of analysis will give guidance. If you like to live dangerously, play naked on biotechs just before an FDA announcement. Whoo hooo! Better than any roller coaster I've ever ridden. You won't sleep while you are sweating the outcomes. Also, buying a call or a put with proper analysis and selling it for a profit can be a good income strategy. There are many ways to play this strategy. Buying ahead of earnings announcements and then selling just before or just after the actual announcement event can generate good returns!