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Selling Options: What are the potential risks and rewards?
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Selling uncovered or "naked" options puts the premium in your pocket up front, but it exposes you to risk—potentially substantial ri Show More
Selling uncovered or "naked" options puts the premium in your pocket up front, but it exposes you to risk—potentially substantial risk—if the market moves against you.
When selling put options, you have the obligation to buy the underlying asset at the strike price if it trades below that price at or before expiration. When selling call options, you may be obligated to sell the underlying asset at the strike price if it trades above that price at or before expiration.
You collect the premium, but you may have the obligation to buy or sell the underlying at the strike price if it trades below or above that price at or before expiration depending on if it's a call or put.

You are welcome to share:
1.What are the potential risks and rewards in selling calls or puts?
2.What trading strategy do you use when selling options?
3.When do you sell and what's your risk management strategy?
4.How was your trading performance when selling puts or calls?

Reward: Top 10 excellent posts will get 800 points (based on quality and total likes). All posts with more than 20 words will get 28 points.
Time: Through August 29, 2023

*Important risks to consider: Selling naked options is considered a high-risk trading practice, as it exposes the investor to high potential loss, while only providing a limited profit. For naked calls, the risk is essentially unlimited since a stock could theoretically keep rising. For naked puts, the potential loss is substantial, but limited to if the stock goes down to zero.
Note: Please avoid specific details of setting up an options trade (e.g. picking the underlying, expiration date, and strike prices). Please keep it more high level and a discussion of options concepts. The focus should be on education and not advice.
Important: Options trading is very risky and is not appropriate for all customers. Read the Characteristics and Risks of Standardized Options before considering trading options. Please check the disclaimer here.
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