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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Sergio H who wrote (52125)	6/10/2001 9:11:08 PM
From: GROUND ZERO™	Respond to of 94695

A put would only increase in value if the underlying stock goes down, not up... therefore, the theoretical maximum value of any put would occur if the underlying stock went to zero..... a covered call position in that same stock would lose the same value if that same stock went to zero, minus the gain of the short call position if the covered call position were implemented..... GZ

To: Sergio H who wrote (52125)	6/10/2001 11:04:36 PM
From: Gersh Avery	Read Replies (1) \| Respond to of 94695

A naked put has slightly less risk than owning the stock. Slightly less because of the premium received. The stock could go to zero. If you have a naked put out on the stock, you still have to buy the stock at the strike price. You have perhaps confused naked puts with naked calls.

To: Sergio H who wrote (52125)	6/11/2001 12:20:56 AM
From: Joe Waynick	Read Replies (1) \| Respond to of 94695

Sergio, if you review McMillan, “Options as a Strategic Investment,” you’ll see why naked puts and covered calls are equivalent. In fact, McMillan says naked puts are SUPERIOR to covered calls because while the risk/reward ratio is the same, transaction costs for naked puts are lower since the writer doesn’t have to absorb commissions on two transactions. The risk for write naked puts is no greater than the risk of owning stock outright and selling a call. It is true that if you own the stock, it could appreciate in price. However, since you’ve written a call, you have the exact same upside potential limitation as one does writing a naked put on a stock that suddenly advances. In fact, the profit potential with naked puts is greater since put writing typically have a greater premium than call writing. We’re not comparing stock ownership vs. naked puts. We’re comparing naked puts vs. covered call writing. I hope this clarifies things somewhat. BTW, Mama Bear sent me a link to a broker that does allow options in their IRA accounts. Here’s the link: stockoptions.com