Explore Your Options by Jay Kaeppel
RISKS OF NAKED OPTIONS
I heard recently about a firm specializing in selling options that went belly up and that all their clients lost their money. Is this true and if so, what lessons can I learn from this and most importantly, how can I avoid a similar fate?
Yes, it is true and the short answer is that if you don’t sell naked futures options then you won’t experience exactly what they experienced. But even beyond that, there are myriad lessons to be learned. And interestingly, one of those lessons is not that all traders should avoid selling naked options. But more on that in a moment ...