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Non-Tech : Bill Wexler's Dog Pound
REFR 1.590-0.6%10:24 AM EST
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To: Daniel Chisholm who wrote (869)4/28/1999 6:44:00 PM
From: Bill Wexler  Read Replies (1) of 10293
 
I meant shorting with covered put. In the case of writing a naked call, a sudden spike in the stock price - let's say on the day of expiration - means you must take the loss. Shorting with a covered put means that you get to keep your short position, the put expires worthless and covers some or all of your paper loss on the aforementioned short, and you get to roll over into the next month's puts.

Therefore this strategy provides about the same safety as covered call writing, but also limits your potential profits if the stock collapses entirely. There is a *tad* more risk than covered call writing because the underlying short postion may be subject to a forced buy-in.
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