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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: jebj who wrote (10511)4/23/1999 8:57:00 AM
From: Herm  Read Replies (1) of 14162
 
A VERY interesting approach JB! I looked in Larry McMillan's book and indeed he defines a "Covered PUT Write" as a strategy in which one sells PUT options and simultaneously is SHORT an equal number of shares of the underlying security. So, technically this kind of trade would be considered naked.

McMillan writes that "covered" means a written option has an opposing market position on a share-for-share basis in the underlying security. That is:

SHORT CALL

1. A short CALL is covered if the underlying stock is owned. This is the traditional CCing model.
or
2. A short call is covered if the account is also long another call on the same security, with a striking price equal to or less than the striking price of the short call. CCing against the LEAPs (spread) fall under this situation.

SHORT PUT

1. A short PUT is covered (for margin purposes) if the underlying stock is also short in the account.
or
2. A short PUT is covered if there is also a long PUT in the account with a striking price equal to or greater than the striking price of the short PUT.

So, JB your short PUT against a long CALL on the same stock would be naked according to the above definitions. Comments???? It sounds too good to be true what you are trying to do JB.
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