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

To: Tom K. who wrote (7445)	5/5/2000 11:08:00 AM
From: Poet	Read Replies (1) \| Respond to of 8096

Tom, Are you talking about selling naked calls or writing covered calls? I've not sold naked calls, but I'm an active cc writer and use a number of strategies, depending on the market, the stock, and most importantly the time of the month when I write them. many people write cc's once monthly, usually at the beginning of the month,above resistance, with the intention of letting them expire worthless and hence use the profit as income or do reduce the cost basis of the underlying. Another strategy, one that I've been using on QCOM since the momentum left it a few months ago, is to write cc's a few times a month, letting the movement of the stock within its recent trading range guide my writes and buybacks. Then a week prior to expiration, I (if given the opportunity provided by a pop in the stock, which temporarily inflates the theta) write one last set of cc's and let them expire worthless. This works well on a large holdings of large relatively stable stocks in volatile markets. As far as put selling goes. One can apply the second strategy there as well in a flat to downtrending market, provided one sells puts in strong companies and uses the trading range of the stock as a guidline. I think many options traders fail to understand that selling options doesn't mean the seller is bound to let them expire worthless. Healthy regular profits can be made by trading in and out.

To: Tom K. who wrote (7445)	5/5/2000 11:25:00 AM
From: Seldom_Blue	Read Replies (1) \| Respond to of 8096

No question selling calls in a down market makes money. You said you are familiar with the risks, which is unlimited if you sell naked calls. I personally do not like unlimited risks. Selling puts does not have unlimited risks. It has a floor - stock can only go to zero. I would suggest if you want to sell naked calls, do so in a spread so you are protected in case they get bought by CSCO and the price doubles overnight. No matter how remote the possibilities, that sort of things do happen. I went naked for the first time on my PMCS calls recently. I only did it on 2 contracts. I have $30 profit built in already on these calls. I will close them if it moves against me for 15 points. Of course as soon as I did it, the market had a mini rally. I have been thinking along the same line you are thinking. If I find a stock that is grossly overvalued, I will probably do a bear spread using calls. But since I usually track stocks that I like, I have not found any candidate for such a strategy yet. Seldom Blue