amein..<ot>
i use morgan stanley dean witter, same broker for five years, he is in his mid thirties, had to get his options license to handle my account, fully understands, and at times trades in tandem with my moves. find out bear stearns policy, your broker or branch manager may be ignorant of the nature of "selling" either a put or call, they are quick to allow you to "buy", which entails incredible risk and loss of capital due to time limits.
way i would approach is as this...ms broker, i have 25k, i would like to buy 100 shares of cmgi @ 245....any problem?, i know the risk that the stock can go down!....now that i say i want 100 shares and i have 25k, will you allow me to sell one may 240 put, and get a 17 premium...should next friday cmgi be below 240, please give me the stock and i will gladly give you 24k...my risk, is that i commit to but cmgi today, for delivery next week at 223 (240-17)...so mr broker, have i not reduced my risk???????
the above approach borders on almost as if you are talking to a child, but in todays world the majority of brokers are only skilled in mutuals,annuities, bonds, etc, very safe products...
ed a.
p.s...should the stock drop below 240 by next thursday, and you are not ready to accept assignment, you can cover the may 240, by selling a june 240, have added additional cash through premium difference and still be committed to buying 100 shares at 240...same exposure, more cash in, reduced cost when you decide to accept put, if ever!...the sale of a put allows you to establish a long position at the time and price that you suits you....(and as you state "learning experience" in your profile, what you "learn" can enlighten others as your broker, and benefit both...you with cash and she with commissions) |
