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

To: Seldom_Blue who wrote (5779)	3/29/2000 8:25:00 PM
From: Jill	Read Replies (3) \| Respond to of 8096

I agree with you, Seldom. I rarely use margin at all. Right now I am 10% margin but even that's unusual for me.

To: Seldom_Blue who wrote (5779)	3/29/2000 9:18:00 PM
From: PAL	Respond to of 8096

Hi Blue: great post. I cannot agree more. If you read my subsequent posts on the subject, you'll see that there is risk involved (especially using margin). Please read also an excellent post by Steve 667 showing the various calculations of the consequences should the stock drops. While I am not a CC player (I prefer selling puts), I try to illustrate that there are other profitable option plays. Nevertheless, just like any strategy, be aware of the risk. Let us just say you don't use margin, the return is half to is posted, thus around 10% minus commission/spread per month is not that bad. Yet CC should be done only by experienced investors because of the directly opposite conditions that the strategy demands: - Assume that you are not on margin (eliminate that risk of margin call) - You have the situation: when do you buy the stock and sell the CC? At any time the stock is be either overbought or oversold. But the basic concept of investing is: a. Buy the stock when it is oversold b. Sell CC when the stock is overbought So you have diametrical opposing concepts. Ideally you buy the stock in today's bloddbath and wait for recovery before selling CC. Thanks for warning newbies about the risk of CC on margin. Best regards Paul