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Old 09-10-2007, 01:19 AM
DcifrThs DcifrThs is offline
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Default Re: articles on covered call options

just a quick interjection about studies involving returns/risks of strategies that involve selling of options.

unlike typical securities, the risks associated with option writing are not always visible in the data. even long term studies may miss a good deal of data and thus bias the riskiness of the strategy or whatever is being studied.

i remember reading somewhere that on average, options tend to be slightly overpriced...possibly due to relatively larger demand to hedge long/short positions than to sell to those who wish to hedge. one thing the study/article noted though was that it would make perfect sense for the average option price to be that much higher if you account for unobserved risks of selling of options. i.e. sellers require higher rates to write options.

in "house of money" a few of the managers who drubny interviewed mentioned they didn't like being short volatility.

clearly though there are places for selling options in setting specific strategies as mrbaseball has shown a bit.

just be aware that selling naked options may seem more attractive than it is due to lack of realized and observed risks.

there is a lot on this topic, but those are just a few thoughts.

Barron
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