Bear market conditions made selling naked high-strike calls appear profitably safe

Evidence

Gradually, too, the culture of the Chicago Board Options Exchange changed. Initially, it was (as noted above) allowed to trade only call options, and it did so in a bear market, in which calls with high strike prices seemed always to expire unexercised, because the stock price remained below the strike price. A good income could therefore apparently be earned by selling those calls without bothering with theory or hedging. “Sell the 280s and drive a Mercedes” became the motto of at least some traders, referring to high-strikeprice ($280) calls on IBM, then the stock on which options were most heavily traded (Doherty interview). — Donald MacKenzie, An Engine, Not a Camera, 743

Categorization

• DEFINE: Concrete illustration of a ‘naked call’ strategy — selling options without hedging when they seem likely to expire worthless.
• CANDY: ‘Sell the 280s and drive a Mercedes’ is a fun motto reflecting pre-theory options trading in a bear market.