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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: Mike Buckley who wrote (43520)	6/15/2001 8:16:06 PM
From: StockHawk	Read Replies (1) of 54805

Just as no margin is required to buy common stock, none is required to buy option contracts. I don't understand your comment. If I may jump in here, I believe the issue is that in an IRA you cannot enter into a type of transaction that could potentially cause you to lose more than you have in the account. In other words, say I have $10,000 in a regular account and I sell 10 naked JDSU $10 calls for $5 each. I take in $5000. Next week, just my luck, someone floats a takeover offer at $60 per share. Suddenly, it will cost $50,000 to cover my short calls. My account is wiped out and I'm thinking the Amazon rain forest might be a good place to hide - at least while I'm in the process of suing my broker who - shame on them - allowed me to trade inappropriately. Of course, I could also pony up the money and take the loss. But you can't just add wads of cash to an IRA. Since certain call positions can have "unlimited" downside, you can not use them in a "limited" account like an IRA. At least I think that is the reason. StockHawk

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