The concept of selling options to receive a premium is pretty straightforward but careful consideration must be given to choosing the strike and monitoring the position.

While it is not recommended, a position with limited liability, such as buying options, can be left unmonitored if you are happy with the initial risk. However, a position with unlimited liability, such as short options, must never be forgotten. As motor sports commentator Murray Walker would say, “Anything can happen, and it often does”.

What follows may not be the only rules for selling options, but they are a great place to start.

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