I did another goofy trade today...I lost maybe $100...
I better not say what is was.
The interesting thing about options is you can trade calls and end up with a put position or trade puts and end up with a call position.
For example...if somebody buys 200 shares of Aapl and sells 2 may 630 calls against it...that person has sold 2 may 630 puts. It just doesn't say that on the confirms.
Selling Covered calls is the same as selling uncovered puts...Or selling puts naked.
Brokerage firms have gotten in trouble because they didn't understand this. It wasn't that long ago that brokerage firms didn't allow naked put selling... But they did allow covered writes.
Where I have seen the public get in trouble is when they misunderstood
the risk.
Somebody might think I can handle the downside of owning 500 shares of a stock. Hey if I sell covered calls...I can handle more downside...
I can buy more shares...maybe...instead of buying 500 shares...I buy 1,000 shares and sell 10 calls.
Well...just make a profit and loss chart with different share prices and it becomes obvious that the pnl for covered writes are very different than owning fewer shares...
Anyway..I have seen so many people blow up on this....
The stock gets crushed and then it is ugly...
