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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: Bridge Player who wrote (13083)	7/23/2000 3:55:11 PM
From: Dan Duchardt	Read Replies (1) \| Respond to of 14162

BP, I'm wondering about combinations of this sort from the standpoint of calculating return on investment. The two calls in your scenario represent a debit spread, and the only cost of carrying that position is the initial debit (11_3/8). The put is naked, and has it's own margin requirements. While these may vary some from broker to broker, the premium plus 20% of the stock price seems fairly typical for ITM options, with the % possible lower for OTM. In this case that amounts to about 11 In your example, the net cost of 4_5/8 may not reflect the amount of money you have to tie up to carry the position, and unless I'm interpreting the margin requirements all wrong it looks like you will have around $22 tied up in this position. That would substantially reduce the 7:1 leverage you have stated. Have you looked at this question in any detail to determine what kind of leverage you can really expect? Am I missing something? Dan