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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: PoetTrader who wrote (2001)	8/15/2001 11:59:07 AM
From: rydad	Read Replies (2) of 5205

In case you didn't see the post on the Options 201 - Obi Wan Kenobi thread: To:Uncle Frank who wrote (37) From: edamo Tuesday, Aug 14, 2001 8:24 AM Respond to of 53 uncle..."selling puts"... the risk/reward ratio is within your control, dependent upon when the position is set, based on a potential momentum indicator reversal... true with support levels being breached constantly, the put sale is much lower risk then attempting a buy/write...which many on your thread are espousing....the buy/write in a downward trending market is a bit of lunacy as you are starting with a diminishing asset and trying to stay even...all the time cash out... the put sale first affords cash in, and a delay to purchase that which you want...but you are controlling it... real world...jnpr at 46 on 6/6...sell the jun35 put with two weeks to go and scalp .25...the stock tanks is at 31.50 on june expiration, cover and write the july 35 for a net credit of 1.90...stock continues to fall and on july expiration it is at 24.26....reset with oct35 for a net credit of 1.30... at the moment cost if assigned is 31.55..against a 23 common price...still no cash out, cash in, and only an economic obligation backed with cash.....the buy/write or long position at 46 is not as well off... with options, timing is the difference between profit and loss...refer to my atml example....the discussion is about capturing abnormal volatility... the sell side gives a fall back position when cash collaterilized... By the time I figure this stuff out and understand it, someone posts a new, "better" strategy. There was a recent post about DITM puts/calls I need to understand now. My goal is to find a strategy that is significantly lower risk and returns better than a CD. I will be out of a job soon due to my company ruthlessly moving the program to Florida. So I have some cash and I am trying to figure the best, safest way to invest some of it to generate more income. I'll let you know (or you'll see my posts) if I stumble upon anything.

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