re: Option writing stuff - for The Trader Dear Trader,What do...

re: Option writing stuff - for The Trader Dear Trader,

What do you think of this?

(1) selling a covered call - max upside is case where stock price reaches just below the strike. Your capped profit is the call premium plus the small stock rise.
Max downside is stock price falls to zero; your loss is stock price when you entered the trade less written premium.

(2) selling a naked puttputt - max upside is when stock stays above strike and you keep the premium.
Max downside is stock price falls to zero and you are forced to pay the strike price for it.

If you think these have different risks you are leaving the stock out of your calculations. U are pretending you have the stock already and you are just writing a call. U probably think the stock is safe and won't fall.

In both cases a smart day trader like U will trade out early at some stop loss, either (1) by buying back the call and selling the stock or (2) by buying back the put. For a given stock price fall the loss on closing out the whole trade will be about the same won't it? Even if you don't sell the stock you held it for the trade and you have to put the drop in its price into your comparison don't you?

cheers

PS as for rare - what about fairly recent big falls in option stocks LLC, MAY, QBE, CSL, NCP, ...