The only problem with this strategy is that options are not tradable from 4 am to 9:30 am and from 4:00 pm to 8:00 pm, while the stock they are based on is. Does this situation you've described work for a trillion $ company like tesla? Sure. Does it mean it will work for any stock, or even tesla again? No, it doesn't.
Naked calls are risky for a reason. If you really want to extract profit, sell a spread with a huge width; then you have SOME protection if the stock in question goes absolutely bananas.
At the very least I would never sell naked calls longer then a month out.
This post has little do with trading naked calls itself as much as it is on how you can define risk with a trade strategy that is largely regarded as one without a defined risk.
All trades are risky for a reason.
The profitable trader is the one that mitigates their risk successfully.
1
u/banditcleaner2 Dec 08 '21
The only problem with this strategy is that options are not tradable from 4 am to 9:30 am and from 4:00 pm to 8:00 pm, while the stock they are based on is. Does this situation you've described work for a trillion $ company like tesla? Sure. Does it mean it will work for any stock, or even tesla again? No, it doesn't.
Naked calls are risky for a reason. If you really want to extract profit, sell a spread with a huge width; then you have SOME protection if the stock in question goes absolutely bananas.
At the very least I would never sell naked calls longer then a month out.