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Technology Stocks : America On-Line: will it survive ...?
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To: Jason Cogan who wrote (9050)3/25/1998 11:36:00 PM
From: Investor-ex!  Read Replies (1) of 13594
 
Jason,

I disagree. Selling puts against a short position is actually somewhat "safer" than an outright short position, just as selling calls against a long position is "safer" than a straight long position. Furthermore, at these nosebleed levels, the odds of a covered put position are actually in one's favor, as some sort of correction is long overdue. Yet if the stock continues to rise, buying back the puts will cushion the loss from the rise.

Yeah, you give up a lot of "potential" upside on an outright short position from a spectacular crash but, even in that case, you've got a very reliable profit of short price - out of the money strike + premium collected. However, judging from the Street's love affair with this stock, I'm really beginning to think a spectacular crash may not be in the cards, even if the overall market goes into the crash mode, due to the "growth story" this stock carries.

Please elaborate further on why you believe covered puts are an inferior strategy. Thanks.
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