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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: Mathemagician who wrote (1100)	6/20/2001 11:08:48 AM
From: adairm	Read Replies (3) of 5205

You are absolutely right about the risk using margin. The problem is, almost everyone who writes naked puts uses margin to secure them. Very few, I bet, write cash secured puts. Now that given it some thought, however, a cash secured naked put strategy allows one to collect interest on the cash while the put decays. On the other hand, if you own the stock, and sell an OTM call, you stand to make a little capital gain on your stock if you get called out. So, you can win twice. 1) collect call premium, 2)get called out for a profit. Naked puts only allow a single payday: Collect premium. You could profit by getting put, and then have the stock go back up above the stike price, I suppose... Anyway... the whole point was that both strategies work best in bullish markets. And neither strategy works well in bearish markets. And I can't see an advantage of naked puts over covered calls in this environment, especially as I want to avoid margin! Cheers! Adairm

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