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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: Mike T. who wrote (11672)	10/15/1999 8:42:00 AM
From: Casaubon	Respond to of 14162

I was absolutely NOTadvocating naked option positions. I was suggesting doing buy-writes, and only using that CC dollars to play the side show game. Be very, very careful these days. Alan Greenspan is once again reminding people of the very high valuations in equities, and in the face of an inflationary PPI things could get ugly. Cash is real important, as is some amount of protection, such as writing calls many months out, or even buying puts. Good Luck!

To: Mike T. who wrote (11672)	10/17/1999 5:58:00 PM
From: Dan Duchardt	Respond to of 14162

Mike, et al. Your cautionary words are well taken. I absolutely agree with you about limiting risk, and I hope nobody took my post as advocating loading up on naked options positions. In fact I was proposing that with appropriate money management buying and selling options can expose you to less risk than CCing while allowing potentially better gains. I assume from the way your acquaintance grew his account so quickly, he was committing most of his cash to options which is certainly a high risk, all or nothing approach. Kind of like betting double or nothing with 50/50 odds. You can run up a big gain, but by keeping all your capital constantly at full risk you will eventually lose it. Adding even more risk, raising additional capital by shorting naked options and exposing yourself to possible debt you cannot cover is inviting inevitable disaster. I've read in some old SI posts on another thread about following a 90-10 rule if you want to play the long options game. Invest 10% of your capital in the options you believe in, and keep 90% in reserve, or at least in much more conservative positions. I was suggesting something similar in my post where I noted that I had the cash necessary to exercise the ROST calls I had purchased if I chose to do that. Dan