aren't you ignoring the collateral requirement on the naked short put in the calculation of the return?
Of course I did. You can compare this strategy to Buy and Hold, or Sell Covered Call by ignoring all the cost of money, etc. Or to introduce a complicated model by allowing x% p.a. variation, throw in probabilties that QCOM will reach 240, 250, 260, ... 400 by Jan01 expiry date and calculate the expected values using margin interest rates of 9 %/year, I am sure that it still come out better.
You are right about the stringent margin requirements for selling naked puts.
1. minimum equity:
$ 100,000 Waterhouse, Schwab, Fidelity
$ 50,000 Brown & Co
2. Maintenance requirement
20% to 30% of the underlying stock price plus current premium minus OTM amount
3. check the box that you have traded options before.
Note:
- Personally, considering QCOM has such a big run from the low 150 to 190, I do expect some dips before resuming the upward trend. Those dips provides trading opportunities.
- Never think that any stock, whether gorilla or king or a super dynamic company will go up forever. Notice where AOL and CMGI currently; they have been viewed as no miss stocks. Even MSFT is not considered as the premier stock which would double or triple in the foreseeable future (to reach $ 1 1/2T market cap?).
- Not to be afraid to cut losses in option trading by rolling to other stocks and/or later month.
- greed in option trading is the biggest sin
Best
Paul |
