Well Jim I appreciate the concern but the point of this thread will be for me to discuss all of this in advance, just so I don't go to the poorhouse. Hopefully others can benefit from this too. I fully understand what you are saying...selling calls can leave you short a lot of money and wipe you out. OK fine. But there's no need to mystify this...with discussion of hidden this that and the other. Yes there is a spread, yes there are premiums, and yes there are commissions. My only point was that high premiums do indeed mean you have a 'head start' in that you aren't paying the premiums...assuming a flat stock price you are getting that money if you sell calls rather than buying them. And yes, yes, I am a novice but bear with me anyway.
So what if I sell calls and the stock stays flat in that time period. If there was a healthy premium on the calls, I put the cash in my account when I buy them back. I suppose then I have to contend with spreads. They should be better in a highly liquid issue such as this (?)
So what if I buy long term puts (LEAPS) and the stock fluctuates over time, even starts out by heading up 20%. If at some point down the road it unravels badly I will collect my winnings. If the stock goes up, and stays up, over that time period, I lose the money I paid for the puts. Doesn't seem so mysterious to me.
I do appreciate the warnings but don't try to stop me from playing options on this issue, I WILL press on, if only to learn HOW I should play it. I lean towards buying puts (long-term, strike price let's say 80 or 90), fantastic premiums and all. Let's keep this discussion alive.
Just so I don't continue to go on as a blathering idiot I promise to pick up Options as a Strategic Investment and read it this weekend. If anyone else can suggest a publication or an online article please feel free to do so. |
