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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe)
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To: Joe Waynick who wrote (2076)6/11/2001 1:25:25 AM
From: Howard R. Hansen  Read Replies (1) of 2241
 
since naked puts are equivalent to covered calls.

Writing naked puts is not equivalent to writing covered calls. When you write a covered call you are putting up the underlying stock as security to guarantee you will deliver the stock in you are assigned. But if you write a naked call it also means there is insufficient cash in the account to guarantee you will buy the underlying stock if you are assigned. Hence because the broker could be exposed to much more risk when you write a naked call the broker requires you to enter into a margin agreement to reduce his risk.
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