lets say you do your strategy with one of each option (corresponding to 100 shares of stock per option), how many shares of stock would you need?

Part 4: http://marketshadows.com/2014/06/27/glad-didnt-sell-may-go-away/ - that's the discussion on how to calculate returns. I thought Trent was making very good points I agreed with. Anyway, this is just for your amusement/thoughts. It's kind of complicated, and I'm just sharing the issues that were coming up with put-selling in particular.

Part 3: Here's the virtual put-selling portfolio: http://marketshadows.com/virtual-portfolios/put-selling-virtual-portfolio/. Did well--in a very good market where the "risk" was not confronted. Michael convinced me that this was too risky. Here's his article: http://www.bankers-anonymous.com/blog/options-trading-part-i-nfw-edition/. There was another interesting comment to Paul a while back about accounting for profits. Which made the point that risk and ROI has to include potential buybacks.

Part 2: potential blow up... cont. With a virtual portfolio we could have unlimited resources to buy all the puts back if the market fell drastically, but in real life we'd get margin calls and face a disaster. I think that was his main objection. Paul, who was running the portfolio quit, so I decided to unwind it by letting the puts expire worthless, or buying them back. Because I haven't yet been that concerned that the market is tanking (for real), I've not pretended to buy things back.

Thanks for the detailed response. That's practically a post (hmmm...). I didn't know you did options too! Okay, so I the options trade you set up above, did you also own shares of the stock for this strategy (balanced so that sold calls would not have been naked calls)? I'm going to go through the possibilities. On Market Shadows, we had a put selling portfolio which only sold puts. Michael was critical of that portfolio because I believe -- the potential for portfolio blow-up...

I do not know how to edit my own comment (good to know), so where I said Michael the Banker...... thinks "hedging," I should have said thinks "options."

Hi Trevor, For the sake of discussion, it makes sense to me to hedge a trade when you are not certain what direction the price of the entity will move. Also, if you really like a stock you're holding, but worried, to sell calls on the position. And/or if you're worried about a general decline in the market due to Russia, Ukraine, ISIS, global warming, whatever - to hedge bullish positions with various options (e.g. selling calls). But let's say you have a stock such as MannKind that you want to hedge for multiple rather bearish reasons (many particular to the company itself), would it make more sense to walk away and have no position unless/until you believe your odds are much higher of being right on the general direction? In other words, why this stock? Michael the Banker has written that he thinks hedging should be specifically for sophisticated investors when they are essentially making money on the volatility rather than for less sophisticated investors who are trying to make the most using leverage. His argument contributes to my possible conclusion that the best play on MannKind might have been NO play, for most people. (If you already owned a lot at a lower price and didn't want to pay taxes on the appreciation, that would be a good reason for selling calls or buying puts, that I get.) Is there perhaps a psychological phenomenon going on in which people become attached to their "pet stock" and want to be in it no matter what? And perhaps that's why some people get so angry if you challenge their thinking?

that reply was meant for you. What companies have the best vaccines/treatments?

Wow. Was it just a matter of time?

Hi Moon Kil Woong,

I see corruption and "socialism" for the very wealth (when it comes time to bail them from losses) as more of the problem than "socialism" in general. The economic foundation needs to be rebuilt, better, in my opinion. I believe we will need a mixed economy, but a with a better mix. ~ Ilene