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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe)

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To: Howard R. Hansen who wrote (2078)	6/11/2001 4:44:01 PM
From: LKO	Read Replies (2) of 2241

By a naked put I mean writing a put in an account in which there is insufficient cash in the account to buy an assigned stock. By a covered put I mean writing a put in an account in which there always will be sufficient cash to buy an assigned stock during the life of the put. That is not how the world has defined "naked puts" regardless of common sense. (Naked is always secured by cash or margin). A covered put (as has been pointed out before on this thread) is secured by the underlying stock already sold short. In general, the naked put (secured with cash) is the equivalent of a covered call, but the brokerages have it classified it as a higher risk operation probably it implies things a possibility of going from cash to equity (instead of equity to cash as in covered calls). However, I find that reasoning dubious because of the great variation in risk of various equities. It is good to know some brokerages are sane enough to allow naked puts (presumably when secured with cash) even in IRA accounts.

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