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Strategies & Market Trends : Options -- Ignore unavailable to you. Want to Upgrade?

To: Greg Jung who wrote (2538)	2/9/2000 10:55:00 AM
From: edamo	Respond to of 8096

greg no offense intended, but what is your point? you had a successful speculative trade....congrats! "how would you get the equivalent result via selling covered calls or buying puts" i don't believe i mentioned "selling covered calls or buying puts"..... we were talking about margin capacity and its efficient use weren't we???? be aggressive,as it appears that is the direction you are heading, but stay focused and explain to me succinctly the "depper" hole i'm digging.... maybe consider the fact that i can profit from a put sale with zero cash outlay, by wisely using capacity that lays fallow ed a. p.s....i prefer butter over "margarine"

To: Greg Jung who wrote (2538)	2/9/2000 10:59:00 AM
From: SecularBull	Read Replies (2) \| Respond to of 8096

Greg, good post. Don't confuse things by adding covered calls to the mix. The original point that the previous poster made was that selling puts was less margin intensive than buying calls. I had to read through your post a couple of times, but I concluded that you disagree with the previous poster, and that buying calls (as it effects margin) is cheaper than selling puts. You further explained that the potential for return far outweighed the potential for loss when buying calls, and while I agree, that might tend to confuse the argument. Regards, LoF

To: Greg Jung who wrote (2538)	2/9/2000 11:20:00 AM
From: PAL	Read Replies (3) \| Respond to of 8096

Congratulations to your 800% gain (from $ 240 to $ 2,000) in 3 months. How many times in your life have you done it? You can always make an example. There was one poster whose several months ago bought 100 contracts of CMGI Jan/200(presplit) calls at 25c, thus spending $ 2,500. Practically everyone thouyght he wasted his money because CMGI was selling around $ 110 (presplit) with about 1 1/2 months to go. CMGI went to $ 335+ before expiry. His options was worth $ 1,350,000 in 1 1/2 motnhs from an investment of $ 2,500. He has not been heard since, probably bought an island in the Carribean. One of the most respected poster on SI, Mark Peterson should be able to verify the above story. ____________________________________________________________ Where does that leave us? There is no fast rule to say that you should always sell puts, or sell cc or buy puts or by calls. That all depends what your outlook is and what your objective is, and the propect of the stok, the market, the economy etc. Each different environment requires a different strategy. Edamo has demonstrated so many times about margin: If you have $ 1M and use all to buy calls, then there is no margin left since option is not marginable. OTOH if you have $ 1M and have $1M assignable stock exposure (by selling puts), you still have a sizable margin room. Ed does not say that because of that you should always buy put and never buy call. He only says that the notion of buying calls requires less margin than selling put is erroneous. I support his view . I believe Mark Peterson one posted an excellent view about option (I wish I can get it again). Nevertheless, some of the basic concept of option is: extremely bullish: buy call neutral to slightly bullish: sell put/sell covered call OTM extremely bearish: buy put, better yet: sell the stock Note: never never use the strategy of selling put to buy a stock. I can go on and on but enough for now. paul