Friday's Best Of The Web 7/20/12 @Mark_Lexus @OptionsHawk @OptiontradinIQ

Today's first article comes from one of the first people I started following on Twitter, @Mark_Lexus.  In his article he talks about the dangers of selling naked puts or calls.  I've heard plenty of horror stories about margin calls, stock assignments, etc.  People think that by going XX% out of the money, they're safe.  Today's action in Chipotle ($CMG) is a perfect example of how they can be wrong.

"My suggestions if you are thinking of selling naked puts:
1. Consider each put sale to be a cash secured put.. do not use margin even if you have the bankroll for it
2. Choose stocks to do this that you are comfortable buying lower if it drops.. and actually mean it, cant have it both ways, like it one day, then not the next.. if you are on the fence, dont do it.
3. Consider earnings dates in the timing of put sales, since the IV rise ahead of earnings will negate any time decay.. i said 'consider' not 'avoid'"

Click on the image to read the full article.

 The next article come from @OptionsHawk, who I've also mentioned on here several times.  In his blog post, Joe Knuckle describes how to stay direction, or delta, neutral and still make money in the stock market using options.  This is exactly the theory behind iron condors, although Joe's post pertains to getting long vega, which generally means being net long options.  Note that his CMG trade would've been a nice winner!

"One of the many advantages of trading options is that you do not need to pick a direction to have a winning trade, you can use indicators and statistics to set up high probability strategies that are Delta Neutral."

Click on the image to read the full article.

The last article comes from someone I had the pleasure of meeting while I was away last week.  @OptiontradinIQ wrote a great post explaining the Volatility Index ($VIX) and how to trade it.  I learned a long time ago to stay away from any of the VIX derivatives or ETNs, however.

"The first thing investors need to understand about the VIX is that it does not behave like a stock.  This is because it is a statistic, whereas stocks are based on a business with revenues and expenses.  I think Jared Woodard explained it best in his recent article on Condor Options"

Click on the image to read the full article.