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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: James F. Hopkins who wrote (11908)	11/27/1999 4:23:00 AM
From: Richard Gibbons	Read Replies (1) \| Respond to of 14162

Shorting and selling puts at a target price to cover the short would be the equivalent of shorting a naked call. That strategy kind of scares me, particularly in this ferocious bull market. In general, when I believe a stock will decline, I'm betting on stocks that I think are way overvalued (e.g. RMBS, MU, GTW). But, there's a reason that the stocks are overvalued: investors like these stocks, and are willing to pay above what I see as fair value. And if they're willing to pay high prices, who's to say that they won't pay higher prices? Plus, I don't use TA, I just use FA, so I'm not very good at timing. So, shorting (or selling naked calls) scares me because of the unlimited risk. When I bet a stock's going down, I generally use long puts, so that if I'm wrong, I only lose 100% of a very small portion of my total capital. The time decay is painful, but I prefer the lower risk. Richard