ARS,
I assume you are talking about writing the put on SEBL. The comparison you are making with the 35 call and 25 put is OK, but it's not "apples to apples". In the case of the cash backed put, you have $1920 of your money tied up, and the most you can gain is the $580 you collected no matter how high SEBL is in January 2003. For the buy write with the 35 call, your net investment would be the $2000, but the potential gain would be the full $1500 premium. The net $500 gain if the stock closes at $25 is correct, but it is only at a closing price of $25 or below that this comparison is relevant. (I assume this is hypothetical, since the stock did not get to $35 during market hours. It does not appear you will get $15 for these calls if the stock is at $35 tomorrow.)
The comparable buy-write to the short 25 put is the long stock with a 25 call, since in both cases the maximum potential gain is realized for any closing price above $25. At today's closing prices of $37.64 on the stock, and $19.20 on the 2003JAN25, the net investment would be $1844, with a potential gain of $656 if called out. This is somewhat better than the short put, though to be complete in the comparison one should consider that the cash backing the put can collect interest. If you are getting more than about 3% on your $1920 you are better off with the short put. Assuming the stock stays above $25, which is clearly your hope, you also have fewer transaction fees with the short put that just expires worthless.
Dan |
