You wrote "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)
WITH NAKED PUTS.....IF THE STOCK TAKES OFF ON YOU....DON'T FORGET THAT THE PUT YOU SOLD FOR MAYBE $1.50.......CAN BE BOUGHT BACK FOR MAYBE $.25....AND YOU CAN SELL A HIGHER STRIKE PRICE PUT, IF YOU LIKE. ANOTHER NICE THING ABOUT THE PUTS.....AS OPPOSED TO CC'S....IS YOU ARE TOTALLY OUT OF THE POSITION......IF YOU FIND A MORE OVERPRICED PUT ON ANOTHER STOCK....YOU CAN JUST SELL THAT ONE....INSTEAD OF SELLING THE NEXT UPSTRIKE PUT ON THE ORIGINAL UNDERLYING
Uon 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.
I AGREE WITH YOU ON THE WAY THAT EVERYONE CALCULATES ROI...IT'S A PET PEEVE OF MINE ALSO...ALTHO IT'S HARD TO ARGUE WITH GIANTS LIKE HERM, AND LARRY MCMILLAN.....STILL.......WHEN I BUY THE STOCK....THEN SELL THE CC......THE WAY I CALCULATE ROI IS THE TOTAL END OF THE DEAL....THE PREMIUM IS THE ONLY INCOME IN THE NUMERATOR (PLUS ANY APPRECIATION IN THE STOCK PRICE)....AND DENOMINATOR SHOULD BE THE AMOUNT PAID FOR THE UNDERLYING STOCK.....NOT...REPEAT.....NOT THE AMOUNT PAID FOR UNDERLYING MINUS THE PREMIUM RECEIVED.
THAT'S THE WAY I SEE IT.
there, 2 of my pet peeves. I welcome any comments. |
