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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Teresa Lo who wrote (10680)5/10/1999 4:44:00 PM
From: VincentTH  Read Replies (2) of 14162
 
You wrote: As for covered call writing, I personally think it's better to write naked puts since it is the exact same position and it actually costs less in terms of transaction costs and should the market be going down, you actually will lose less money doing this...and no, the risk is not "infinite". In fact it's the same as if you own the stock

Agreed with you about the risk of NP as being the same as CC. However, I beg to differ that writing NP is the exact same position as CC. The advantage of CC is that you can leg into the position by only shorting the call when the stock has appreciated, thus effectively locking in the gain (well, to some degree, Herm would call it "protection"). I used both CC and NP, and I view writing NP as an effective way to make use of my margin power ('cuz the brokerage house would lend my stock to the shorts anyway, so why not make my stocks work for me instead.)

My 2 cents,

//V
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