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

To: Lost in New York who wrote (1788)	11/18/2000 11:14:10 PM
From: KFE	Respond to of 2317

David, I assume you do this rather than a covered call because it requires less capital It does require less capital but that is not the main reason. Spreads are generally superior strategies to covered calls because they will generate a better ROI with less risk. You might see some people state that they can consistently generate double digit monthly returns with covered call writing but these people are kidding themselves and should not be trusted. How do you decide on the price limit? Most times I enter spread trades with a limit order that splits the bid/asked spread and will adjust the limit price if I think the risk/reward ratio justifies it. One of the main advantages of a spread order is limited risk and trying to leg in takes that away. If your market timing is that good you should be doing outright buys and sells and not spreads. You can also usually get a better price by entering the order as a spread because it gives the market makers two sides to trade against. This is a big incentive for them to make the trade. Regards, Ken