Play It On Paper- Clappy's Newbie Option Thread Message Board

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Pastimes : Play It On Paper- Clappy's Newbie Option Thread

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To: Clappy who wrote (60)	7/25/2000 5:19:45 PM
From: hlsjones	Read Replies (1) of 176

Clapper Well as it turned out Sun did run up - a lot. I put in an order to write(sell) JAN110s at 17 and, wouldn't you know it, the highest trade I saw was 16.875. However, with Sun so strong today, it should pop another buck or so in the morning, so I let ride. I have seen, out here, that someone sold puts thinking(hoping) Sun would go down. I hope so also - after my calls go. Then I can buy them back for less than I got. Lets look at the numbers. Stock at $101, JAN110s at $17. If I'm not called that's 17/84 or 20.2% for six months. If I am called it's 26/84 or 30.9%. Sun has to fall to less than $84 (my magic number after the calls are sold) before I'm hurt. Anything above $84 and I'm making money. If I'm bearish on the stock I still don't think it will fall much below 95, so I'm cool. (sleep real good every night) Remember that since this is stock and is marginable you could really double those percentages. Is 62% ok for 6 months - YES! There is no margin on writing covered calls. The cash is yours to use the next day. I don't even consider the worth of the available cash in this equation but the fact that you could pull the cash to - say - make a house payment has got to be worth something. There is a margin hold plus your received premium if you sell naked puts. Most brokers are so stupid they won't let you sell naked puts unless you have lots of cash and more experience than they have. You need to look around for a broker who understands what risk is. If you find a good one don't ever let go. I actually had a broker tell me it was less risky to buy a stock at $68 than to sell the $65 put for $3 and then take the stock at $65. What a dunce! Think about it. If you buy the stock your ultimate downside risk is $68. If you get "put to" your ultimate downside is $63. This guy tried to convince me $68 was less risk than $63. I know I look stupid but........ Harry

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