John,
You would need option level 4 or 5 to write put or call naked options (5 for index options).
1) You would need cash if the put was exercised. If you sold 10, Feb 90 puts, you would need 90K. On the call side, I am not sure, so you should check with your brokerage house. Probably 50% margin, I would guess.
2) Lots of people don't understand options, or aren't qualified to do this. It may seem like a "layup", but there is always risk. What happens if their earnings are bad, no split is announced, or their "forward looking" statements send chills down your back, and the stock goes to 80 in a week? Nobody wants the EMC stock anymore. Mo-Mo is over, and they ain't the darling anymore...
How about the other way? Great earnings, no end in sight to their growth, and a 3 for 1 split? YOu don't have stock and you need to chase it. Nothing is easy with options.
3) I used the Feb 90's and the Feb 110 (puts and calls, respectively) because they are BOTH out of the money, so have the most pure premium (NOT OJ, so to speak <g>). The 110 puts have instrinic value.
Hope this helps, and BTW, this is not investment advice. |
