MILESCFA

Cruising for Carnival Options

Fundamentally, doing a "buy-write" (buy 1000 sh at $25, selling 10 calls $25 strike) and selling "naked puts" (selling 10 puts $25 strike) ARE THE SAME TRANSACTION... same risk, same return, blah, blah, blah...

I just don't understand any author that recommends this without explaining this equivalency. You would have the same transaction if you did "20" buy-writes at $25 or sold 20 naked puts at the $25 strike. It is a high risk, high return transaction that may mislead naive option investors with the "111% return" figure.

I don't know whether the author will be right or wrong, but whenever I see someone advocating this "duel strategy" of a buy-write and a naked put at the same time without noting the "two trades" are equivalent, and I see them often on SeekingAlpha, I get an uneasy feeling. I hate to say "the author wants me to take Sally and Sue" (because guys will get excited).... but guys, "there ain't no difference between the two".