Qualcomm Incorporated (QCOM) Message Board

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Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 165.13

+1.1%

3:59 PM EST

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To: Art Bechhoefer who wrote (128922)	5/12/2003 2:31:06 PM
From: Stock Farmer	Read Replies (1) of 152472

You should have exactly the same expectations with a short put as for a long-stock, short call ("covered call"). The latter is also known as a "synthetic put" because on a total position basis it is equivalent in risk/return to a naked put with the same level of capital commitment. Check it out for yourself. Stock at $31.05, JUL 35 short put premium $4.70, short call premium $0.83 Work out your total net worth in the two cases (a) stock closes above $35, and (b) stock closes below $35. When you include interest at 3%/year on capital held in reserve and premiums, the naked put is slightly more efficient than a buy-write. Cheers, John

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