How far out should you write Naked Puts? Opinions?
I'm looking for opinions on how far out you feel Naked Puts should be written?
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Personally, I write puts on "front month" options only. These are puts that expire next month. I never write puts that have a more distant expiration. I do this for three reasons:
1) The time value of options errodes more quickly as you approach expiration.
2) A one month holding period gives me a better stock price predictability window. This actually has to do with stock price predictability theory, which states that the further out you are trying to predict, the less confidence you will have in your prediction.
3) I do not write during months that companies release earnings. With a one month window, it's easy for me to pick stocks that are not releasing earnings. Two months would also be acceptable, but more than two months would be impossible.
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Personally, I write puts on "front month" options only. These are puts that expire next month. I never write puts that have a more distant expiration. I do this for three reasons:
1) The time value of options errodes more quickly as you approach expiration.
2) A one month holding period gives me a better stock price predictability window. This actually has to do with stock price predictability theory, which states that the further out you are trying to predict, the less confidence you will have in your prediction.
3) I do not write during months that companies release earnings. With a one month window, it's easy for me to pick stocks that are not releasing earnings. Two months would also be acceptable, but more than two months would be impossible.
