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Strategies & Market Trends : Contrarian Investing
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To: fedman who wrote (126)9/15/2006 11:06:35 AM
From: pcyhuang  Read Replies (2) of 4080
 
To fadman & Joby: An additional alternative

Using the figures given by fadman, I will illustrate just one more alternative in option trading.

Writing 10 put options (1000 shares) would require a margin deposit of US$10,000 treasury bills or cash. The premiums income on the 10 put options will be $1,500.

Now, upon expiration of the option, if the stock is above $5 you would have earned 15% or 30% annual rate on your invesment, not counting the extra yield from the T bill.

If the stock is below $5, you would have bought the stock at a net cost of $3.50 (put to you at $5 by the option holder less the premium you have received.)

Many other possible alternatives are availble in the use of options.

pcyhuang
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