Options trading strategies for beginners. Why you should always trade naked
reasons why you should always choose to trade making options. I have heard
numerous times from people that trading naked options is very risky and it's
like picking up nickels in front of a bulldozer. That's just a complete
misrepresentation and a lack of understanding on how trading options and
options is dangerous are not profitable traders. They're not. So what I can tell
you is there are three main advantages of why you should always trade naked
options the first is that when you trade options which is the only way and the
best way for you to be a consistently profitable trader because it turns you
into the casino and not the gambler remember the only way to be a
consistently profitable trader and to have a positive probability of profit is
to sell option premium and turn yourself in to the casino and not be a gambler
and not try to guess prices but the three reasons why is that when you sell
option premium you are maximizing the amount of credit that you're receiving
the second reason is that it is much easier in the 5 out of 100 instances
that that position is going to be challenged you are increasing the
likelihood that you can easily manage and roll that position forward because
you're not spending money on the lower price put option which is essentially a
throw away in a garbage option and the third reason is that by selling a naked
option it reduces your buying power so it inherently protects you against the
human desire to be greedy and to maximize all of their profits and to
maximize their gains which actually comes back and bites people in the ass
and that's why they end up losing a lot of money if I've seen people who they
should they can only trade two contracts of Facebook on a naked basis
and then they end up trading 20 vertical credit spreads and let's say they would
treat the 158 put of Facebook on a naked basis and then they would trade you know
20 with a vertical credit spread and a strike price of 158 and then they would
buy the $150 and then what happens is Facebook 5 out of 100 times will trade
at 154 so it's in that no-man's land and then because they don't have a large
enough account size to take ownership of that position and they also are limited
in their flexibility to manage that position because they can't buy the hype
the overpriced put option to maintain the integrity of that vertical credit
spread then their broker ends up closing out that position for an enormous loss
stock and trading vertical credit spreads for three reasons it maximizes
the amount of premium that you receive because you don't have to buy the lower
price insurance it substantially increases the flexibility that you have
in managing the position and also it inherently protects you against greed
because it reduces your buying power to an extent where you can't trade too many
contracts when you trade vertical credit spreads you can trade 20 contracts on
Facebook whereas if you were trading naked you could only trade two and that
five out of a hundred times gets people in trouble when they trade too many
contracts but when you trade naked options you're protected this is David
Jaffee from BestStockStrategy.com you can go to BestStockStrategy.com and enter in your email
and receive $400 worth of free training please like comment share and subscribe
to this video if you have any questions leave a comment below I answer every
single question and I'm just here to be of service and to help you so if you
have any questions let me know I'm sorry for the baby crying and screaming in the
background I can't really do anything about it but I'm here to be of service