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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (5628)	8/30/1999 4:36:00 PM
From: Jill	Read Replies (1) \| Respond to of 54805

I'm not more knowledgeable but will add the little insight I do have: 1) You write calls when a stock is overbought (although I really can't tell about LEAPS calls--I guess it's the same); i.e. you expect it to sell off soon. Thus on a volatile stock especially you will get rich premium, and higher if you write/sell at this point, and you are more protected just in terms of likelihood of not being called away (another reason to write calls, at least short term, is when a stock is treading water and you want to hold it but you also want to make some money in the meantime) 2) You write puts when a stock is oversold--i.e., it has sold off too much and will recover soon. Again, on a volatile stock you get rich premiums, and higher if you write when the stock is oversold, and once agian you protect yourself as most likely the put will expire worthless. Writing puts however gives you the added advantage that if you are put the stock you get it for a lower price than if you had bought it TODAY--so you have to figure out what your real goal is. You might simply want to buy some stock cheaper than today's market, and thus write a put where it's fairly liekly you'll get put 3) Writing covered calls and puts is my prefered method. I have only tried buying calls a few times and I didn't do well with it. When YOU sell the option, YOU are the "house", as was taught to me. You take in cash, or rather, you are actually "selling insurance" to "buy stock"--which is what made Warren Buffet rich. You can't spend opportunity but you CAN spend cash. Opportunity is buying calls, and it's a bet you can lose. Thus writin options is as you say, a widows and orphans rather conservative play that can reward you well.