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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: phillip who wrote (10848)5/19/1999 1:11:00 PM
From: David Wright  Read Replies (2) of 14162
 
Phillip,

With regard to selling naked puts

While the margin requirement is less, wouldn't it be prudent to put the 30% difference away somewhere where you can grab it, in case you do get exercised? It seems to me that if you do that, then you are essentially giving up much of the earning power of that 30% of capital anyway, to cover your risk. Also, it seems like I have read that the comparable premiums between a naked put, and a covered call favor the call. Might be wrong on that though? McMillan calls the strategies equivalent, but I question whether the risk/reward profile is the same, especially for those of us who like the near term combinations for income generation and compounding purposes.

Dave
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