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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: NateC who wrote (11338)	8/3/1999 7:25:00 PM
From: OX	Read Replies (4) \| Respond to of 14162

first a stmt: as you said, for the naked put, it depends on what your broker charges on margin reqts. not all require you to put up that much margin for a naked put. (no, I have not done a comprehensive survey :-) on naked puts, if the stock rallys you're truly out of the upside. on CC's, at least you can roll up/out your calls to participate. at least that's the way I see it. naked puts look real nice tho, esp. in this environment) on another note, I've never fully internalized 2 concepts on margin and CC. 1st is your stmt "but only $5,000 of your own"... if you buy shares on margin, it's as good as your own money. price goes down, you still owe. price goes up, you still owe. granted i like the 'up' better than the 'down'. and I see the leverage, but I'd rather truly use OPM) 2nd: I read how the books calculate net investment on CC's. In my calcs, I don't count prem received from the write. It just doesn't make sense to me (I know, I'm stupid). sure you get the $'s right away, but you really don't get to keep it until it expires or thru a closing transaction. still everyone does it this way, so in my view, I'm just calculating a more conservative return. there, 2 of my pet peeves. I welcome any comments.

To: NateC who wrote (11338)	8/4/1999 12:57:00 PM
From: Hectorite	Read Replies (2) \| Respond to of 14162

Re: unless you have a better margin arrangement....you're no better off with the Naked Put [vs cc]...except for commissions that is. Well, yes you have to have the margin available to cover. But in your example the cc requires a 5k margin debt that you pay interest on and the np is 5k collateral that you earn interest on. Do some brokers really require actual cash in the margin account for writing? My broker only looks at margin headroom, that is, do I have enough buying power to withstand assignment. I use margin, but conservatively (keep debt to < 20% of buying power). Writing naked put is no problem even though I have zero cash. Further, the np premium lightens my margin debt. Now, the seduction is to go crazy with puts because you get the premium and you look at your positive balance and think you're really smart. That can unravel in a hurry. How would you like to be short puts on a basket of 'net stocks right now? ...."Dear, why are you under your desk in the fetal position?.."