[mrbaseball]

[ QUOTE ]
For example "QQQUP", a sept put option on nasdaq is trading at .58, and the theoretical value is .13. I understand naked calls/puts are insanely risky, but this seems like they are also ridiculously +EV. What am I missing here?


[/ QUOTE ]

We are currently in a volatility spike. When that happens all options go up due to fear and uncertainty. This "probably" is a good time to be looking at selling options. Not naked but for juicing the bottom line.

See a stock you want to buy? Sell the put instead and hope you get excersized. The risk is the stock rockets and you miss getting long it. But at least you keep the premium. The other risk is it tanks and you are stuck with it. But if you really wanted to buy it anyway at least you bought it better due to the premium.

Long in the portfolio? Excellent time to sell covered calls. Risk here is blowing through your short call making you sell prematurely but you still got the premium plus the gain until the strike if it was out of the money. Downside risk is having the stock crap out but if you wanted to be long it anyway at least you get the premium again. And if you want to puke it you have to probably pay up to puke the options as well.

The returns on these kinds of strategies is currently very appealing but you have to understand the risks.