Question
Please respond to this post: Naked calls, naked puts, and spreads (combinations of long/short calls puts) can be used very well in both bull and
Please respond to this post:
Naked calls, naked puts, and spreads (combinations of long/short calls puts) can be used very well in both bull and bear markets. Since a call is just a contract giving rights to 100 shares of the underlying at a predetermined price at or before a specified expiration date, the buyer or seller could both benefit depending on the direction of the market. For example, in a bear market, both the call seller (short calls) and the put buyer (long puts) will make profits. In contrast, during a bull market, both the call buyer (long calls) and the put seller (short puts) will make profits. The only difference is the amount of upside potential on profits and the fact that being short options exposes you to unlimited risk. When selling or being short contracts, your max profits are limited to the premium collected on the sale multiplied by the amount of contracts (minus commissions if applied). So in my opinion, neither is the better option but playing the long side gives more upside potential for profits.
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