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Strategies & Market Trends : Options
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To: steve mamus who wrote (1537)1/23/2000 10:22:00 PM
From: Jill  Read Replies (2) of 8096
 
Steve, covered calls should not affect your buying power at all. Selling puts will require a hefty bit of margin to be held as collateral. Hopefully this is okay as I don't think any investor should be using up lots of margin in this market--they could get caught on a big correction and be in a margin call.

When you sell a put you take the risk of having the shares put to you--and having to come up with that $ to buy them. So the brokerage firms hold margin collateral against it. They've got 3 different formulas and they always take the highest one!

If your margin collateral is just sitting there collecting dust, selling puts is a great way to earn $. On JDSU tonight someone commented that 35% of their portfolio income this year came from selling puts. I'm looking at JDSU. Option Investor points out that Feb 210s have a premium of $17 and change. I'd find 210s a bit risky at this point (it is a decent level of support) and would go lower, to play it safe. But the premiums are great, and JDSU might (I hope) retrace later in the week.
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