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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: adairm who wrote (1104)6/20/2001 2:37:04 PM
From: Stock Farmer  Read Replies (1) of 5205
 
hi adairm

Mathemagician is precisely correct that cc = puts.

Sometimes the difficulty is one of perspective. Not owning the stock is a psychological barrier. But it helps to look at it another way.

Say you start with a cc strategy. What if you are called? Well, next month use the cash you would have used to buy the underlying again instead to secure puts. If ever assigned, you're back to calls again... and so on.

If you play with this model through all of its various permutations and combinations you will see that the capital requirements are identical to a pure cc play, except for commissions :o)

Which should tell you that those times you were using puts they were equivalent to cc.. which makes cc equal to put.

This example in perspective is also a great refinement to the bog standard cc strategy.

John
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