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Strategies & Market Trends : Selling Puts: Have Cash Will Travel -- Ignore unavailable to you. Want to Upgrade?

To: taxman who wrote (924)	1/23/2000 10:44:00 PM
From: Tom K.	Read Replies (2) \| Respond to of 1235

...but you guys keep the price down--more supply... I do not believe that option pricing is governed by supply and demand. It is a derivative based on the underlying. It is the underlying's factors that determine the option price. ...what about selling naked calls if you think market is going down?... The concept is right. The weakness is that the market over time has an upward bias. Consequently, stocks are more likely to head upward and if you are short a CALL, you are exposed to how high a stock can rise, i.e., unlimited risk. On the short PUT side, a stock will generally only drop to book value so you can more easily see your risk which has a limit. One approach has limited risk, the other is unlimited. Tom