SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Roman S. who wrote (10807)5/18/1999 5:32:00 PM
From: James Joyce  Read Replies (1) of 14162
 
each brokerage will have their particular margin requirement for naked put writing. The scenario you portray is generally accurate. If you buy the call and sell the put it means you are bullish on the stock. If the stock runs up you gain the premium on the put which expires worthless plus the gain on the call. The margin money is not sunk money as it sits in your account and generates interest or is covered by other holdings.
The negitive scenario is a major drop in the stock where you lose the premium on the call plus lose the increase in the price of the put. Normally you would assume you will not look for the put to be exercised but will close the position before expiry.

Just selling the puts works well if you are bullish and are interested in acquiring the stock if it drops. This just lowers your cost but if the stock stays strong you are satisfied with the premium you got on the puts. Remember that put buyers are often buying insurance on their holdings so they gain the security.

You should read MacMillan's book for the various scenarios and the follow up planning. I also suggest using some good analysis tools for these situations.
good luck
James
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News