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Technology Stocks : INTEL TRADER
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To: Chris who wrote (5178)1/23/1999 3:15:00 PM
From: Gersh Avery  Read Replies (2) of 11051
 
Chris Re: Covered puts

short position in XYZ and sell (covered) puts is the same tactic as having long position and buying puts.

Almost, but not quite .. think of who gets the premium ..

It might be considered the same as owning the stock and writing calls.

The seller of options works with the clock .. the buyer fights the clock. The buyer preys for volatility .. the seller hopes that the stock stays somewhat flat.

Consider the 120 Feb AMZN calls .. they closed Friday at 18 1/2 ask with AMZN closing at 123. If AMZN closes below 138 1/2 2/19/99 it is a loss for the buyer .. anything below that makes it a gain for the seller .. the same would hold true for sellers of puts.

As brokerage firms and market makers tend to be sellers of options, the market has a tendency toward making as many of these expire worthless as possible.

At first glance shorting both put and stock would result in a one for one movement but there's big bucks involved in the premium.

Gersh
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