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Strategies & Market Trends : Selling Puts: Have Cash Will Travel
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To: tyc:> who wrote (884)1/22/2000 9:38:00 PM
From: tyc:>  Read Replies (1) of 1235
 
There is another strategy for getting out of a threatened short put position, or out of a deep-in-the money covered call when you feel the market has turned or topped out....

What you do is buy calls and short the stock.. You buy as many calls as you need to make a delta neutral position with the short stock. You will have bought more calls than stock sold short. The result is you will make money whichever way the market goes. On the upside, your calls will more than offset the loss on the shorts.

I have just on Friday rolled out of a covered call situation this way because in my opinion the stock was topping out; I sold the stock of my covered call and bought out-of the money calls to protect my now naked deep in the money calls.
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