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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: Herm who wrote (12107)	12/24/1999 12:39:00 PM
From: Tom K.	Read Replies (1) \| Respond to of 14162

...Is there anything dealing with tax losses or quirks. I would imagine if the same stock is PUT to you twice with the tax time span and PUT strike, that would be considered a wash sale? Are there any other traps?.... Herm, since I generally avoid being PUT, I've avoided this problem.... (read that as I really don't know the answer.) ...I will have to add a new chapter to WINs from your info. It sounds like one would need a good size portfolio in order to take advantage of this type of investment strategy. What do you recommend as the least amount of working capital?.... Only one key item is the brokerage requirement for you to be rated for naked PUT selling. They all have different requirements. After that, the return you obtain is a factor of your portfolio size. Most brokers require 20% collateral, so on a $50 DELL stock it would require $1000 to be in the account (cash, securities, T-Bill, etc.) to sell 1 OTM PUT contract on DELL. If you received 1 point from the PUT, this is (100/1000)100=10% or an annualized 120% return if done monthly. Do it only every other month, and you have to grudgingly live with an annualized 60% return.. once a quarter, 30%....how sad. Because your broker loves you, as a bonus he will also pay you interest on the $1000 if it's in cash.... don't forget to tell him thank you. Now the secret is don't go for 1 point, don't be greedy, give yourself plenty of cushion and take only 1/2.... still a nice return. Since you can do this with equities in the account, multiply out the value of what you have for collateral and you have an idea of the return you can get.... I use 30% annualized as my target and I have been consistently beating that...... however, I've not lost sight of the fact that in this market, a lot of mistakes can be hidden. Only deal in quality stocks.... trust me on this one. Please be aware that what I describe is simply my approach* for income generation. I have set it up to produce monthly income and therefore would not recommend this method as a growth investment strategy....however, some people leave the monthly returns to multiply..... if I were them I'd probably choose a different strategy, but each to their own. Whatever approach one uses, it should fit within an overall plan.... no single options trading approach is right for all. Hope that is helpful. Tom