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Trading Commodities, Commodity Options and Currencies (Collection) by Carley Garner, Paul Brittain

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chapter 4Short Option Strategies

The concept of short option trading is typically not well received by beginning traders. Aside from the horror stories often highlighted in the media and trading literature, short option traders face limited profit potential and unlimited risk. From a logical standpoint, the idea of such a trading endeavor seems unattractive. However, it isn’t a coincidence that the practice was once protected by industry insiders and retail accounts were discouraged to participate. If proper risk management techniques are defined and followed (this is much easier said than done), we believe that option selling delivers optimal odds of success for traders.

A premium collection strategy can be compared to a base-hit in ...

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