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Technology Stocks : Dell Technologies Inc.

DELL 127.22

+3.8%

Nov 24 3:59 PM EST

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To: Jill who wrote (117561)	4/14/1999 6:55:00 PM
From: Chuzzlewit	Read Replies (1) of 176387

Jill, of course the strategy is risky, but it needs to be broken into parts to understand the risk. The risk in selling the naked put is that the stock will go through a decline and stay down. Thus, you will end up holding a stock at a price less than market. But this is less risky going long to begin with because the premium has decreased the cost of the stock. The second part of the strategy should be treated separately from the first. If you buy stock and continue to leverage yourself you have indeed created a riskier position to the extent of the leverage -- that's the source of the additional risk. Alternatively, buying a naked call is risky. Using borrowed funds makes it riskier yet. Ed's strategies work beautifully in a bull market, which is what ed has been experiencing. Michael's focus is on the downside, and he is correct in pointing out that should the market suffer a substantial decline a leveraged position is riskier than a straight long position. No pain no gain. So what else is new? TTFN, CTC

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