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It is in fact how naked puts work http://en.wikipedia.org/wiki/Naked_put http://en.wikipedia.org/wiki/Naked_put
by coolgeek 16y ago
It is in fact how naked puts work
http://en.wikipedia.org/wiki/Naked_put http://en.wikipedia.org/wiki/Naked_put
- eru 16y agoAren't you talking about naked calls (http://en.wikipedia.org/wiki/Naked_call http://en.wikipedia.org/wiki/Naked_call)?
- coolgeek 16y agoThem too. Both involve "selling something you don't own" (the underlying security), a point disputed in the post I was replying to.
- eru 16y agoI don't see how writing naked puts involves selling. They involve buying, only.
- Snurre 16y agoAll buying involve the counterpart selling. How can you buy something that isn't sold?
- eru 16y agoOh, but in naked puts the seller of the underlying assets (i.e. the buyer of the put) calls the shots. If they don't want to sell, they don't have to sell. And the writer of the put only ever has to put up at most the strike price of the put. So no unlimited risks there.