Trading with short bare skins (i.e., selling or putting on a record) can be an effective and profitable option trading strategy. The attraction of bare trading is the ability to collect high rewards by making a mistake when the majority of shares fall when there is an opportunity to buy them at a discount to the current market price. The problem is, however, if the stock goes down and faces a nude situation. Today’s show is dedicated to helping you understand all the ways to cover up short nude outfits.
This episode is especially aimed at people who love short-term trading, and as you can see, there are several ways to tackle this task. Whether selling or writing, we talk about the different ways to block, set up, and replace these contracts. If this is something you have in your wheelhouse, you will definitely enjoy today’s podcast.
We will look at six different ways to block or adjust these barriers and highlight the risks associated with a situation with such a position, especially during black swans.
Do you do them all, or find one that works for you, or a combination that works for you.
Understanding the risks posed:
- As long as the stock is above our deficit point, we can make money in this trade. You can then continue this strategy for the next week, month, or next quarter as you wish.
- Nude clothes usually work very well when markets are rising, moving sideways, or even in a slight downtrend. The problem arises when markets start to collapse or when visible volatility is too low when you start selling options.
- That doesn’t mean you should avoid selling this strategy. You just have to be more discriminating with the help you render toward other people. Simply put, bare idols work well as long as they don’t work!
The first hedging method is to buy at the bottom strike:
- If you buy a put on a lower strike, it creates a set credit spread, and this is a great way to protect the barrier because you can control margin and risk. These short nude plaids should be sold in a synthetic spread version as this poses a definite risk to you.
- You need to spend a little money to buy tail protection, as this can be very beneficial, especially at times like the big black swan of 2020. These events will protect you when another one happens.
- In different stocks and ETFs in different situations, the cost of protection can be longer in a lower strike or close, no matter what.
The second setback method is to sell the Short Naked Call option and turn it into a joint:
- This is a bit more complicated than the first method and so we have to start talking about stock market movements. This is a very classic way of making a barrier and it depends on when you want to make the barrier and how wide your position is.
- There are many factors that go into this method. A good way to block the short naked release option is to sell the opposite set or serial call options on these shortcuts that you sell.
- When you start to change position and buy a bare short call and turn it into a suffocation, you limit your income zone within the broken points.
- It may or may not be convenient for you, depending on the movement of the underlying stocks. Trading here, the breaking point is wider on your put side, so if the stock continues to fall, it gives you more room to be wrong.
- Instead, you had to give up some window that would benefit the post. Most of the time, you won’t need a large margin to do this because you’re tied up with too many margins in a short-term option contract.
- Check with your broker and then try it out for yourself. Maybe trade paper around and see how it works with your cigarette.
The third set method is to do the collar in the existing position:
- Doing the collar is a great strategy to take advantage of existing stock positions and a very effective way to protect this barrier.
- Typically, people try to do this at a net zero value or even for a small loan or a very small debit to lower the cost of insurance. You can sell a call option that lowers the potential, and then use that reward collected from the call option sale to buy a put option during a lower hit.
- If you’re selling the nudity option, it still carries a negative risk. With this set, you can use this premium to finance the purchase or purchase of an additional long-term option contract.
- You don’t have a flaw point or any wider flaw here than you did before. If you’re really worried that stocks are going to take your nose off, this could be a good alternative.
The fourth hedging method is hedging with short futures:
- Now we move on to advanced strategies! Hedging with short futures allows you to start thinking creatively about how to position and in some cases block with different products.
- You can use this as a tool to start thinking about the different ways you can use other products. If you are engaged in short-term trading, you may have several short-term trades in technological stocks and you can use QQQ as a means of defending this position and start implementing some other strategies.
Fifth hedging method – Scroll down short call positions:
- The fifth way is to remove the pig from the second (sell a short naked bell). This will allow you to continue to defend your position by downgrading the short-term call option contract and moving it closer to where the shares will be traded.
- There is no perfect formula for this, but the general idea is to collect additional rewards.
- The trade-off of this method is that when you continue to act on short call alerts, you squeeze and shorten the interval at which stocks can move, and it is useful as it expires.
The sixth hedging method is to distribute the position for additional term and credit:
- The last option we are studying today is the next logical step. If other strategies don’t work and we run out of time, that would be the last thing we do.
- When we extend a contract or a series of contracts to the next month, the goal is to punt the position for a longer period of time, regardless of whether it is a month or more. However, only if we can collect a bonus and additional credit to extend this period.
- In doing so, we must avoid dangerous behaviors because we do not want to dig ourselves into a. deeper hole.
- When we talk about launching a position, we’re just talking about closing the monthly contract we’re trading. You repurchase these contracts and reopen the same contracts next month. This effectively improves the premium accumulated in the position in the total volume of trades and makes it a good hedging method.
Option Trader Q&A and Nico
Merchant Q&A is our favorite segment because we listen to one of our community members and help answer their questions live. Today’s question comes from Nico:
Hello, Kirk. I hope you are well and your family will be fine during this pandemic. I have three quick questions. It doesn’t take much of your time. My first question is how to adjust this position as well as move on to the next validity period. For example, let’s say you have a 30 percent probability that the loan will be disbursed and have 30 days left to expire. Now, let’s say two weeks – let’s say three weeks have passed and now you have two weeks left until the expiration date, the campaign didn’t exactly match your targeted estimate, so you’re at a loss right now. Now, if you move it to the next expiration date or adjust it using an iron condenser, will you reduce your losses even more? This is my first question.
My second question has to do with commissions. Now, I don’t know about you, but in my case they pay me $ 6.50 for each contract. This is a comfortable amount of money for you, so if you have a very small amount of money, then you can spend the money. Yes, that’s right. My question is, what other platform do you prefer, or do you use a method that allows me to bypass these commissions or pay a lower commission? This is really my question.
My third question is that I’m dealing with trading options, so basically it’s been going very well for 60 days. I started playing at $ 2,000 and now it’s down to $ 6,000. It wasn’t really consistent. I lost there and there, and then I won. But when I won, I finished it. What I do is read the news. I’ve also done technical analysis and I really buy and deposit money on calls, buy or deposit calls and it doesn’t expire, so the validity period is almost a year. Do you think this is just luck? Should I continue this? Should I avoid it? What do you think about that? About it. Thank you very much.
Remember, if you want to answer your question on a podcast or LIVE on Facebook and Periscope, go to the link below. OptionAlpha.com/ASK and press the big red note button in the middle of the screen and leave me a personal voicemail. There is no software to download or install and it is very easy.
Thanks for listening!
I am humble that you took the time to listen to my show and I never take it for granted. If you have any tips, suggestions, or comments about this episode or topic, feel free to add me to the comments section below.
Do you want automatic updates when new shows are aired? Subscribe to Option Alpha Podcast Before you forget it now on iTunes, Google Play, SoundCloud, iHeart Radio or Stitcher – it’s quick and easy.
Did you like the show?
Please, please, just think about accepting 60 seconds Leave an honest comment on iTunes for the option Alpha Podcast. Ratings and reviews finally useful and very grateful. They are important in the show’s rankings and I read every single one of them!
Also, if you think someone else in your social circle might benefit from the topic discussed today, please share the show use the social network buttons you see. Here we help spread the word about what we want to do in Alpha, and personal recommendations like these always have the biggest impact.