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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: adairm who wrote (907)	6/4/2001 10:54:24 PM
From: hivemind	Read Replies (1) of 5205

Hi adairm, (!) ;) For simplicity yes, it beats having to put on two positions at one time. But more importantly, I too use margin capacity to secure the puts. I didn't make that clear. Calls have an interest component which compensates for carrying the common in a buy-write (loss of market rates on the cash). Selling puts instead allows me to not use actual margin, which is a higher interest rate then what would be in the calls. So it is more economical for me to use short puts. I did the longer-term puts because they offer a greater absolute dollar value cushion on the downside, hence it is a more conservative play. In my personal judgment, the 23% annualized return combined with the 24% downside protection was worth the risk. Just my way of looking at this one. I also have positions open in retail, drugs, financial, semiconductors. What do you think of my SUNW 02 15's?

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