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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: Night Writer who wrote (11335)	8/3/1999 7:02:00 PM
From: NateC	Read Replies (1) \| Respond to of 14162

I didn't mean to be condescending. I came to this thread looking for help and to make a contribution. I apologize for any comment appearing to be condescending. I understand selling the puts at $45 if you want to buy the stock. I don't understand how the buyer hedges by selling the lower puts. The act of buying the 45 strike puts is a hedge on the stock. Selling the 40 strike puts now puts the 45 strike buyer at risk. I don't understand why the 45 strike buyer would do this but I'm willing to learn. NW NW.....didn't think you sounded condescending In looking at all of these trades.....it's hard to tell who did what....but there was combination of a 45 sold put, and a bought (long) 40 put....which looked like a classic bull put spread

To: Night Writer who wrote (11335)	8/3/1999 11:18:00 PM
From: Greg Higgins	Read Replies (1) \| Respond to of 14162

Night Writer writes:I understand selling the puts at $45 if you want to buy the stock. I don't understand how the buyer hedges by selling the lower puts. He gets back what he needs most, capital. Buying the 45 puts requires an outlay of 20 * 2,000 * 100 = 4 million dollars. By selling the 40's he gets back 3 million. The act of buying the 45 strike puts is a hedge on the stock. Selling the 40 strike puts now puts the 45 strike buyer at risk. What's his risk? His risk is that someone will put the stock to him at 40. If they do, he puts at 45 immediately (he's covered). If the stock manages to rise to 40+, he'll still put at 45. It's only if the stock is above 45 that he doesn't put.