How To Write Covered Calls - An Ongoing Real Case Study! Message Board

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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: Night Writer who wrote (11313)	7/30/1999 5:37:00 PM
From: Jeff Meek	Read Replies (2) of 14162

The bull put credit spread was a popular topic on this thread quite a few months back. The consensus was, if you like the stock, and can get a good credit on the spread, then it can be a nice play. However... It was also pointed out that you have a big exposure. Deep ITM puts have almost zero time premium. This is why the guy in question was able to get a good credit. The problem is that having 0 time premium also leaves you vulnerable to arbitrage moves by MMs or others. So your short deep ITM puts are more likely to get exercised early. This can put the whack on your carefully laid plans. You could immediately sell the stock put to you and resell the puts. But its not a fire-and-forget play. I propose a test. Someone lend me $1M. I'll find a good bps candidate and place the trade. Then I'll be sure to tell everyone on the thread how it works out =)

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