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To: rudedog who wrote (37668)	11/13/2000 1:22:20 AM
From: X Y Zebra	Respond to of 64865

Do you ever do straddles? I have looked at some bull put straddles but I like the higher leverage of the straight positions. Still, the straddle limits the loss potential. Bull Put Straddles... I am assuming you do this under a covered call position, (i.e. sell a covered call and sell a put, naked, or cash covered. same strike prices.) Under a bullish scenario, it seems to enhance the covered call writing, by the premium received on the written put. The problem here is that on a wild market (namely right now -g-), if the underlying falls dramatically, you will be forced to buy additional shares, so in essence, you are "doubling" (if you went 1:1 on the call and put), the loss in the underlying stock held. That is, the loss on the existing underlying, PLUS the loss on the added shares that will be put on you, (all paper). Minus of course the premiums received on the call & put. An interesting way to increase one's position in a specific stock, if on the other hand the stock price explodes, the worse it can happen is you got called away, but that was expected, and possibly desired. My view is that I try to reduce risk and enhance income. By this I mean, that I would sell a covered call (only), at a time under which the stock price has reached some sort of resistance, therefore... (At least in the short term), the odds are that the stock will fall back to the average of the bollinger bands. This “most probable” scenario reduces my risk of being called away. If at this time I also sell the put, then although I am increasing my income by adding the premium received by selling the put, I am increasing the risk of being "PUT" the underlying. --Worse, I did this without maximizing the higher premium on the put, since I am at a "high point" on the price chart. On the other hand... if we are at the bottom of the band, then at that time I sell the put, because the most probable scenario is that the stock will go up (back to its average). It is true that at this point I could also sell the covered call, achieving the Bull put spread that you suggested... except that (although protecting me from a fall), the premium on the call is smaller. (than if I wait to sell the call when it is higher). Still, this does not protect me from the possibility that on a dramatic fall (as we are now witnessing).... I will have to buy the underlying at the strike price of the written put. (I could always buy back the position, and my loss on the put will be reduced by the gain on the written call.) Now... One could enter a Bull Put Spread (Long a put, and short a put of a higher strike price). Assuming bullish conditions. Under this scenario, the risk is limited to the spread in premiums between the short put (a loss) and the gain of the long put. On the other hand the gain is also limited by the same spread in premiums. Frankly I tend to like simplicity and prefer the straight calls and/or puts. (The bollinger bands and other general market conditions will determine which direction I take). No I am not "perfect at finding the absolute top, and or bottom". And yes, it is true that at times I leave money on the table --But Yaacov says that is an illusion, and if I take a profit, I should not worry about the "leaving money on the table" part. He is right.