The Complete Guide to Option Selling: How Selling Options Can Lead to Stellar Returns in Bull and Bear Markets, 3rd Edition by James Cordier & Michael Gross

Author:James Cordier & Michael Gross [Cordier, James]
Language: eng
Format: epub, mobi
Publisher: McGraw-Hill Education
Published: 2014-10-12T23:00:00+00:00

Even if the option is assigned, John still gets to keep the original premium he collected from the sale of the option.

Most importantly, however, is to note that John only took assignment because he wanted to take assignment. If he did not, he could have closed his option out anytime prior to it going in the money.

Conclusion

The topics covered in this chapter are the areas where much of the misunderstanding and fear relating to option selling is contained. However, knowledge replaces fear. You now have an argument for outsiders and “half-knowers” who tell you that option selling is too risky. You know something about the right orders to place when entering a position and what type of liquidity with which you may be comfortable. And although nobody wants a limit move against their position, you know the reasons why it is better to be short options on such a rare occasion than it is to be caught in the futures contract.

With this knowledge in hand, it is now time to explore the most important subject in option selling—the subject of risk management.

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