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 (11315)	7/31/1999 2:04:00 AM
From: RDHickman	Read Replies (1) of 14162

Nite Writer, RE:Bull Spread Using Puts For those that don't have Getting Started in Options , the statements go something like this---- ---A Bull Spread can also be entered into using puts, in which case the put in the money should be expected to lose value more rapidly the the lower, long put. It is the same strategy as that for calls, but using puts instead. In either case, you depend on diminishing time value premium to create a profit, while limiting potential profit and loss overall. EXAMPLE: You enter into a bull spread using puts. You sell one Nov. 45 put and buy one Nov. 40 put. The stock's market value when you open these positions is $42 per shr. Since the higher striking price, the Nov. 45 put, is in the money, premium value is higher than the lower put, which is out of the money. If the stock's price rises, the short position will lose its premium value at a faster rate than the long put, because it will move dollar for dollar with the stock. That would enable you to close the position at a profit. For what it is worth. /Dick

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