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Non-Tech : Any info about Iomega (IOM)?
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To: Francis Muir who wrote (30396)9/19/1997 1:23:00 AM
From: slipnsip   of 58324
 
<I have often wondered why writing calls was not more popular. I guess it takes too much capital for many people.>

Writing covered calls against stock that you hold long requires zero additional capital. I never understood why people wrote calls against positions with the exception of hedging a position for tax purposes. If you think the stock is going down, sell it. Institutions with large positions gain a huge benefit from hedging. Liquidity, and for tax purposes. Transaction costs and spreads are just too great for the average individual to recieve any financial benefit.

Brokers like them because individuals rarely understand them, and brokerage firms get extra commissions due to the fact options expire monthly thus the number of transactions increases dramatically. Plus it sounds cool for the individual at cocktail parties to brag about his/her sophisticated options transactions. See I guess everyone really does win??? The cost of being cool......

Now those individuals writing uncovered options, that is a serious opportunity for profit considering 70% of option buyers lose. Odds are in the writers favor. The losses however can be staggering should the position move against them. This stratedgy requires serious capital on deposit with most firms. A consistant writer stands to make excellent profits as long as they stay the course and have a steel stomach.

Writing naked positions is like being the house at a casino.
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