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Technology Stocks : Intel Corporation (INTC)
INTC 48.72+3.0%Jan 14 3:59 PM EST
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To: Amy J who wrote (180433)3/17/2005 9:41:11 AM
From: GVTucker  Read Replies (1) of 186894
 
Amy, RE: But selling puts (where strike < market) while maintaining cash in case the stock drops, is bearish because the cash-on-the-side is not being worked in the market. In fact, the cash is stuck on the sidelines waiting for the stock to drop. That's bearish. I think you would agree that's bearish. Meanwhile, it's more bullish to put the cash in the market now, rather than waiting for the stock to drop. So, how you wish to actually manage a particular investment suggests whether it is a bullish or bearish stance.


You're connecting things that don't have to be connected.

Selling puts is a bullish stance. Maintaining cash on the side is a bearish stance. Those are two separate decisions. Yes, one might influence a decision regarding the other, but that doesn't change the facts around each individual investment.

That's why I think a lot of people misunderstand the risk involved in their own portfolio in regards to a covered call.

There are two separate trades in a covered call. You are long the stock. That is a bullish stance. You are short a call. That is a bearish stance. In addition, a call option is a riskier security than the common stock. If you're going to trade the call, then you have to be an adept trader. The skill necessary in trading calls is not necessarily the same as the skill necessary in picking stocks and deciding when to buy stocks.
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