The Covered Calls for Dummies Thread Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Covered Calls for Dummies Thread

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Mathemagician who wrote (1903)	8/10/2001 5:25:31 PM
From: BDR	Read Replies (1) of 5205

<<We now own two positions which "have the same risk/reward profile", yet the risk of one is "moderate", the other is "comparable to stock ownership", and the two together is "intense".>> My (humble) interpretation of why Roth feels that a combination is more intense than owning stock outright comes from the assumption that the holder of the stock has now doubled his exposure to downside movements in the stock's price by adding an equivalent number of puts. If the capital at risk, assuming the worst case and the stock goes to zero, in owning 100 shares is X then the risk of owning either 100 shares and one put or 200 shares is 2X (less the premiums of any puts or calls one has written to establish the combination). The more stock you buy or the more puts you sell the more you are exposed which is what I assumed he meant by the position being "more intense" than stock. Is it more complicated than that?

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next