Guest Columnist at The Striking Price for Barron’s: The Case for Options Trading

Once again I am delighted to have an opportunity to serve as a guest columnist for The Striking Price on behalf of Steven Sears at Barron’s. While the title of the column is The Case for Options Trading, the focus of the article tilts in the direction of selling options and lists some of the reasons why new and relatively inexperienced options traders should invest some of their time during the coming year to learn more about selling puts and calls – and not just defined risk positions, but naked (uncovered) options as well.

The Barron’s article lays out some of the rationale behind my thinking, but this is a topic I plan to return to on a regular basis that dovetails with some related subjects I have been discussing in this space and are highlighted in the links below.

Related posts:

• The Case for Selling Apple Puts
• Can Selling Options Make You a Better Trader?
• The Often Overlooked Put Writing Strategy
• Graphical Comparison of Performance of PutWrite and BuyWrite Indices
• More on PUT Returns
• Selling VIX Puts with the Help of a Put Matrix
• VIX Put Matrix Offers Glimpse of Expected Future
• Selling Naked Puts in the Current Environment
• Post-Geithner Financial Naked Calls

A full list of my Barron’s contributions:

• The Case for Options Trading (January 2, 2013)
• Calm Down and Exploit Others’ Anxieties (November 14, 2012)
• How to Trade Options Around Volatile Events (July 10, 2012)
• Be Greedy While Others Are Fearful (May 3, 2012)
• Ways to Turn Volatility into an Asset Class (January 12, 2011)
• There’s Opportunity in Uncertainty (November 18, 2010)
• Will Market Volatility Return to Crisis Levels (September 15, 2010)
• The Perils of Predicting Volatility (May 20, 2010)
• Take a Longer View on Volatility (July 2, 2009)

Disclosure(s): none

Post-Geithner Financial Naked Calls

For the extremely aggressive (and well-capitalized) investor who believes volatility in financials is on the high side and may also have some bullish directional bias, something like a bear call spread with FAZ, the -3x financial ETF, might be an interesting trade to look at.

The truly fearless might even look at selling an out of the money FAZ naked call. As I write this, FAZ is trading with a 48 handle and a Feb 50 call sale will bring 7.20, which means there is room for almost 20% upside movement in the ETF before the trade turns unprofitable. Of course, with the likes of triple ETFs FAZ and FAS, 20% moves can happen in a matter of hours…

[source: optionsXpress]