Selling naked options on an exchange-traded fund (ETF) has an advantage over selling an individual stock option. In terms of their vulnerability to market surprises, ETFs are usually safer than individual stocks. The liquidity requirement eliminates most of the ETFs with an average daily volume less than a few thousand shares. You can compare several ETFs based on quantitative analysis to find those that have the most potential profit per month while still minimizing risk. Usually, when considering a derivative strategy, the best measure of an underlying's effectiveness is the derivative itself. However, this simple analysis does not factor in the volatility and the risk. Beta is a measurement of an investment's volatility, or risk, as compared to the S&P 500. While beta is one measure of risk, it is important to realize that it is based on historical data and can be misleading in some market conditions.
Pages to are hidden for
"The naked option ETF solution"Please download to view full document