Hm... I know of one guy who got carried out for paying to much theta, true, but I would say this particular dude would have kicked the bucket whatever he did.. Bud said:-----------------------------------------------------------------------------------------Aren't you short the downside when your long a stock FDAXHunter... -----------------------------------------------------------------------------------------My point is, short downside means (well, to me it means) you are short gamma/vega if the underlying goes down (long vanna). I'm not sure how you would compare that to a long stock position, but I'm sure, the next time you're short downside, you can convince whoever is responsible for your risk (if anybody is), that it's not a problem at all, since you are short stock, and they offset.

-Bud<blockquote>Quote<hr>Typically a covered short put is a position that is short the put and short the underlying stock (or index). This is a position that is essentually equal to a short call. You were refering to a short put position (not covered short put) in your example. A short put is essentially equal to a covered call position which is what we were referring to in our previous discussions...<hr></blockquote>Just to clarify my statement, I believe the short position you are referring to in the beginning of this paragraph is, a delta hedge position. Covered, means to me, that there is the <b>total</b> underlying or cash (sigma hedge) to cover the possibility of exercise by counter-party. I was, indeed, referring to a short <b>cash-covered</b> put positions. EDIT: A short put and short call, have opposite profit and loss, this is regardless of covered or not. With short calls you get covered with, underlying, with puts you get covered with, cash. Borrowing and lending, right?

Man - It appears that you are coming from an OTC background (mine is listed). In the listed marketplace, selling underlying against a short put does hedge the delta, but I have never heard of covering a put with cash. In the listed world, a short put does not have the same P/L as a short call either...

Just to remind Man, never buy or sell American option (put or call) on cash instrument. This is true in the OTC in particular.