first a stmt: as you said, for the naked put, it depends on what your broker charges on margin reqts. not all require you to put up that much margin for a naked put. (no, I have not done a comprehensive survey :-)
on naked puts, if the stock rallys you're truly out of the upside. on CC's, at least you can roll up/out your calls to participate. at least that's the way I see it. naked puts look real nice tho, esp. in this environment)
on another note, I've never fully internalized 2 concepts on margin and CC.
1st is your stmt "but only $5,000 of your own"... if you buy shares on margin, it's as good as your own money. price goes down, you still owe. price goes up, you still owe. granted i like the 'up' better than the 'down'. and I see the leverage, but I'd rather truly use OPM)
2nd: I read how the books calculate net investment on CC's. In my calcs, I don't count prem received from the write. It just doesn't make sense to me (I know, I'm stupid). sure you get the $'s right away, but you really don't get to keep it until it expires or thru a closing transaction. still everyone does it this way, so in my view, I'm just calculating a more conservative return.
there, 2 of my pet peeves. I welcome any comments. |
