Naked Call Strategy

Discussion in 'Options' started by jasonweil2000, Oct 25, 2020.

  1. What about selling a naked call OTM to collect premium without owning the shares. Then immediately put in a limit order to buy 100 shares at the strike price? If the stock goes down you keep the premium. If it goes up and passes the strike price your limit order would execute for 100 shares at the strike price and it would now become a covered call.

    Has anyone tried this at all? What's the downside here?
     
  2. qlai

    qlai

    Gap?
     
  3. What about dropping the limit order at about .15 below or above the strike? Or just set an alert if the stock gets close to the strike....just buy the shares on a market order.
     
  4. ajacobson

    ajacobson

    Move up above strike followed by a move down that exceeds the premium collected.
     
    Flynrider likes this.
  5. qlai

    qlai

    Stock can gap multiple points overnight or on news - you will get filled at the after-gap price.
     
  6. For a stock that is not trending much it would be safer to scalp a straddle, if you want to try to capture small moves. Buy an ATM put and call, same strike, then go short or long depending on stock movement. Cover or sell to grab gains when you can. This may or may not be profitable, depending on how much movement you get.
     
    qlai likes this.
  7. taowave

    taowave

    So you sell the 110- 115 percent of spot call,watch the stock rally 15 percent at which point you buy 100 shares,even though yourself is not near 1???So now stock you are synthetically short the put at most likely a very very unfavorable price with downside exposure

    Now what??
     
  8. I might be a bit unclear...as im a newb on options. Lets say the stock is at $50. I sell a naked call at $55. And I also create a GTC buy limit order at $55. Even if it gaps up a bit....isnt it better to own the shares slightly higher than the $55 strike...rather than the stock hitting the moon? And the premiums would help off set this a bit too. Im just wondering. I may be way off here.
     
  9. Is this likely on a weekly expiration? I mean im sure it is but not very probable right?
     
  10. The idea here is to create a covered call only if you have to by not owning the stock first.
     
    #10     Oct 25, 2020