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Technology Stocks : JDS Uniphase (JDSU)
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To: Liatris Spicata who wrote (13607)10/27/2000 4:20:28 PM
From: SouthFloridaGuy  Read Replies (1) of 24042
 
Larry - if you received $10,000 for shorting some puts (let's say JDSU yesterday) for the 65 strike, you would have sold 10 contracts since they were selling for $10/option.

Now, if JDSU stayed above the 65 price at time of expiry - in this case it is Nov 18th, then you would have pocketed 10 grand. If JDSU was under 65 at expiry, you would be obligated to buy 1000 shares of JDSU at 65.

This can or could not be a good thing. If you're like me and like JDSU for the long-term, then you wouldn't care owning it at 65. Your breakeven price is actually 55 since you pocketed $10/share. Indeed, if JDSU is trading above 55, you still win out net-net.

Most brokers will not allow you to sell more callable puts than your net equity.

It's a great way to buy a stock a little cheaper if you're unsure of short-term movements or its in a trading range. My father made a lot of money in the 70's and 80's doing it.
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