/biz/ - Business & Finance

>>11826086

This is an example of why trading on margin, or selling naked options is such a risk.

The guy sold calls on natural gas, which would have made money if the price went down.

But instead of hedging his bet, he went naked, which opened him up for unlimited risk. The only way things could collapse is if the price suddenly shot up, which is exactly what it did.

Now, he's stuck having to sell at an ever-growing loss, and he's wiped out.

The same shit can happen if you do a short, especially if you short using margin. The risk of unlimited loss is never a good thing.

If you think a stock is going to go down, buy a fucking put. The worst thing that can happen is that you lose everything. Selling naked calls can create a situation where you not only lose everything, but still owe more.