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Technology Stocks : Seagate Technology
STX 258.21-1.7%Nov 14 4:00 PM EST
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To: dave g who wrote (4772)3/14/1998 3:23:00 AM
From: Jacky AY  Read Replies (2) of 7841
 
Still, writing naked put is not invincible. You already acknowledged tech stocks in general are very very volatile; and that's why you got high premium on options. I believe that volatility can go either way. As fast as tech stocks had skyrocketed in the past, they certainly can come down as quickly. The strategy can wipe out your total capital gain just in one shot! Look, you said you're forced to purchased SEG @ 35 while the stock was below 32. How many puts did you write? What's the value of the put as a percentage of your portfolio? You probably don't want to bet more than 5-10% of your portfolio value (depending on whether you use margin) since you'll need the money to back up your outstanding naked puts. You also mentioned you had to average down further; what if the stock never recover...

With the market going up in the past several years, you certainly have the upper hand in writing naked puts. However, what if your underlying stock lost half of the value in a single day. You may need to leverage your properties to cover... I still don't see the money machine. (It actually works like a slot machine. You collect every coin people fed in. Your coins may not be enough to cover when someone hit the jackpot.)

I just wonder - do you also write naked put against internet stocks like YHOO? And welcome aboard techstocks.com; this's definitely the best site for stock chat.
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