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Re: Selecting options or writing uncovered options



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Guy,

First it is unlikely your equity will allow you an account that allows the
selling of index options.  Make certain you can do the strategy first.

Guy Tann wrote:

> List,
>
> Well, here I come again from our normal position of ignorance.
>
> We're planning on getting more involved with options.  For our next sell
> signal that could arrive any day now, we plan on writing SPX Calls and OEX
> Calls in addition to buying SPX and OEX Puts.  We have very little
> experience buying options and have had beginners luck with our first 5
> trades.  Now we're going to get a little serious here and try to make a few
> bucks.
>
> We've each budgeted $10,000 for buying options and another $10,000 as our
> exposure writing options.
>
> Now, I'm busy reading my option book, like a good little student.  Since we
> lucked out with our previous trades we're feeling overconfident. :)  I do
> have a question regarding buying options (since I haven't gotten to that
> chapter yet):
>
> How should I select what option to buy?  Currently I select 'in the money'
> options and look for option months that have a pretty large open interest.
> Is there a formula or a decision process we can apply to pick the right
> option month?
>
> In terms of writing uncovered options, my question is basically the same.
> How do we determine which options to write?  I guess, even more important
> is, do we write options that expire out 3 months or would we write the near
> month options?  Again, since we're short term traders and will probably be
> buying these back before they expire, my guess is that we should write the
> near month.
>
> Additionally. my idea is that we should write 'in the money' options with
> pretty good open interest.  Again, I'm sure there is a methodology somewhere
> that would help us make a semi-intelligent decision.
>
> Any recommendations or thoughts would be appreciated.
>
> Thanks,
>
> Guy
>
> Paranoia...you only have to be right once to make it all worthwhile!