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Non-Tech : NOTES

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To: sun-tzu who wrote (1883)	6/17/2002 4:49:03 PM
From: Didi	Read Replies (1) of 2505

888options.com received a hard copy yesterday.........déjà vu?......... ============================= >>>SUMMARY Selling an equity put option creates an obligation to purchase the underlying stock. A margin deposit and prior approval from a brokerage firm are required to sell puts. The profit potential is limited to the premium received, but the risk is substantial. Below the break-even point (strike price less premium received), the maximum dollar risk of a short put position is equal to a long stock position. The term “cash-secured put” is used to describe a short put position that is backed with sufficient cash to purchase the underlying stock. Selling cash-secured puts can be viewed as a conservative investment-oriented strategy, when the goal is to purchase the underlying stock. The term “naked put” describes a short put position that is backed by a margin deposit, possibly the minimum equirement, that is insufficient to purchase the underlying stock. Selling naked puts involves risk that is greater than the margin deposit. It is a trading-oriented strategy suitable only for experienced traders who are capable of withstanding the associated risks. Selling puts can be risky or conservative-- It depends on how you use them.<<<

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