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Strategies & Market Trends : The Covered Calls for Dummies Thread -- Ignore unavailable to you. Want to Upgrade?

To: Mathemagician who wrote (1010)	6/11/2001 4:31:33 PM
From: hivemind	Read Replies (1) \| Respond to of 5205

Just keep in mind that it is equivalent to buy-write, but not to simply writing calls on existing long stock. Both buy-write and short put are taking on a new long position in the underlying from a risk perspective. I believe the "superiority" of short puts vs buy-write in comparison is based on the significantly reduced margin and capital requirements for the short puts. This would tend to make the %return numbers seem greater per dollar of capital or margin committed. But although I understand this I don't like the comparison, as it could lead people to short puts beyond their capacity to absorb assignment. If a person is lucky, they can "get away with it", but such an operation is not really worth the risk, in my opinion. As was alluded to by Duf, and rather poorly paraphrased by me, these strategies are more suited to long-term investors than to traders. With buy-writes, you buy common now. With short puts, you buy it later. hm@not-unhappy-getting-assigned-stock-I-want-anyway.com