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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: alanrs who wrote (5147)	4/18/2011 2:42:27 PM
From: ValueGuy	of 5205

Makes perfect sense to me to not rely on margin...though the adventurous side of me (translation: foolish and impetuous) is very tempted to make relatively easy money on loading up on selling of OTM puts at decent yields...though I think days like today would have blown me up! So just to clarify: If I write 10 $1 puts (premium of 0.13 and underlying stock price of $3 per stock), on margin this would have required me to pony up $230 for the margin requirement and $100 for the margin call. However, if I wanted to ensure that these puts are cash covered, I should put aside an extra $670 in order to make the amount of cash available $1,000? (i.e. 1,000 stocks at $1 each) Sounds like technical analysis is very important in writing calls/puts so I definitely have to brush up on this, though I can get basic TA such as RSI on my brokerage account...the rest I'm not so sure yet... One thing I learned (the hard way) is that there is only so much theory you can read about...nothing beats a good old fashioned practice run, tweaking that to make it work, and tweaking it some more to make it work better...

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