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Strategies & Market Trends : Tech Stock Options
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To: Electric who wrote (27504)10/30/1997 4:23:00 PM
From: Tom Trader  Read Replies (2) of 58727
 
>>I read your post on creating a synthetic position, could you give a senario of one that you started and finished, I think I understand but it seems odd that you are buying puts so far out...<<

I am not buying puts but SELLING naked puts--I am buying calls using the premium that I generate on the puts that I sold. Now remember that when you sell naked puts your exposure is that you must be willing to own the stock at the strike price that you sell the puts at--if the position goes aginst you.

I have done this lots of times -- the important thing is to recognize that you have exposure on the puts that you are naked and if the position goes your way, you will make money on the calls and the puts will lose value--you can in due course close out the puts and the calls when you feel that the upside has been achieved.

Hope this clarifies matters.
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