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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: FaultLine who started this subject	4/23/2001 10:31:41 AM
From: hivemind	of 5205

Sold to open a small number of $47 May puts on QQQ. Equivalent to a buy-write where you would buy the shares and write the calls. The risk/reward profiles are the same, but one should take care not to go beyond your capacity to be put, which should be measured against what you would have buy-wrote. There is also the matter of puts always selling for less than the calls compared atm. This is due to carrying costs associated with the stock/calls postion, related to interest rates. Bottom line is the buy-write ties up capital and the calls reflect that opportunity cost. The puts do not tie up capital, just margin power. The theory is one could buy treasury notes to cover the period of the puts expiration, and use their margin power to sell the puts. This is just a report of something I have done, and is not to be construed as advice of any kind. I am only a beginner, having done put sales and buy-writes a few dozen times..... Note have not done the treasuries part of it. I have heard some brokers will pay money market rates on the cash in your account.

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