Subject: Re: Who is doing this buying?
you are tying up lots of cash to secure those far out of the money puts you are short, for a very low return.

Jim,

I always appreciate your insight and thoughts. I am trying to process the statement above. I am certainly prepared for any of my outstanding sold puts and calls to be exercised. However, I am not sitting on any cash reserves waiting for that to happen. Last year I was on margin all year. Just recently raised cash unrelated to naked positions. Keep in mind that usually go naked way out of the money, puts and calls. Sometimes the farthest option out of the money that is available. I do covered calls as well, but that is different.

I have been doing this for 5+ years and netted maybe an extra 50 to 150 Basis points a year.

I have had only 2 options that I am naked on get exercised. DB which I immediately liquidated when it was put to me for a medium loss.
PNC early last year that I held and sold for a gain for 5 points or so.

Of course and a big market move I can easily be exposed. A few have traded in the money but on exercise date they expired worthless. Including BRK 160 puts when COVID started. I sold them for about $25 K and at the worst I was sitting on a loss of $300K +. Fortunately they expired worthless.

My only advice is stocks, even stock of large diversified companies, can move big and fast. So I am usually 40%+ out of the money to start.

Recently I have started focussing of the crazy stocks. I am selling naked calls on CVNA, W, & Coin. All at strike prices 75 to 150% above current prices. Premiums are still huge. I recently had some CVNA $110, that I sold for $3+ expire worthless. I only shad the for about 7 weeks.

Any thoughts would be appreciated.