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Strategies & Market Trends : Option Spreads, Credit my Debit -- Ignore unavailable to you. Want to Upgrade?

To: OX who wrote (1343)	4/8/2000 11:24:00 AM
From: David Lind	Read Replies (1) \| Respond to of 2317

Ox, I did not take your comments to be directed at my errors at all. However, you were right on the money in terms of my specific mistakes. Fortunately, my extreme pain was more psychological than financial. But then again, painful lessons are those most remembered. And like you, I could have had aCray computer running to calculate my positions last week. It was impossible to keep up. I am curious about one comment you made here, and have made before. Why do you feel that a put can be written too far OTM? I can only suppose that is due to what I experienced, which is that by the time price goes ITM it can already result in heavy potential losses? Because that is in fact what I experienced, and want to avoid in the future. If that is your opinion - and I can see some logic in it - then it speaks even more to the benefit of credit spreads versus naked options in most cases. Here's why. To me, the one big drawback of a credit spread versus a naked option is that the short option in the spread needs to be written a bit closer to stock price in order to capture a decent premie once the long option is factored in. But if you are suggesting that naked puts may better be written a bit closer to price to avoid the problem I experienced, then in most cases I would opt to open a spread and have the advantage of the protective long option. Because I am not in this game to strike it rich. I am in it for a consistent return and conservation of capital. Does this make any sense? -David