Steve, selling covered calls will *increase* your buying power, because doing so has the same effect as depositing money in your account.
For example, you have $5,000 in your account, and get charged no commisions (you wish). You buy 100 shares of stock @ $50 per share - $5,000. Your account goes to zero. You then sell the $50 calls for $5 (per share). This brings $500 into your account, bringing your balance to a credit of $500, which you can then use to buy securities/options according to your brokerage firms rules (100% for options, x% for stock).
The stock you own will be sold at expiration at $50 if the stock price is at or above $50 (or so) at expiry, or if you are called away sooner, which is very rare. To sell covered calls, there are no margin requirements other than satisfying those pertaining to the original purchase of the stock.
With the sale of puts, the requirements vary from brokerage firm to firm. Check with your broker on this matter.
Best,
Jeff Smith |
