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

To: hivemind who wrote (1030)	6/11/2001 9:28:41 PM
From: FaultLine	Read Replies (1) \| Respond to of 5205

RE: selling puts OK guys, I just called my Schwab team and they said I can sell puts at my current option level with one slight twist. They must be "cash secured" puts. That means when I sell the put it automatically ties up cash (equity or margin) sufficient to cover the contract exercise price. I said . "Great! That's exactly what I want to do." All I have to do to activate this capability is to fill out the options qualification form, attach a note saying I want to sell Cash Secured Puts and mail it in or drop it off at my local office. They'll "immediately" set it up for me. Sounds like just what the doktor ordered.... --dfl@soareyouguysgoingtomakemeloseallmymoney.com

To: hivemind who wrote (1030)	6/11/2001 10:33:13 PM
From: Dr. Id	Respond to of 5205

You have interwoven some good concepts here, but I'm not sure I completely agree, or perhaps I don't understand. In reference to using margin irresponsibly and that any strategy can be abused, I disagree. It is a function of the extreme leverage available on short puts due to reduced % margin requirements that presents the danger to the unwary. I can, for arguments sake, sell in aggregate more puts against available margin in my account, leaving me exposed to assignment beyond my buying power. This is not possible with straight buy-write, as the margin requirements of buying the stock will prevent it. These are really leverage differences, and one could argue that if naked put selling margin requirements were raised to be equal to that of the underlying, the issue goes away. Actually, this isn't true in my case. For example, this month I sold 10 SEBL July 35 puts for 2.50. While it requires no margin (and the proceeds go into my cash fund), my brokerage removes 35k from my "available cash" in my margin account and sets it aside in my cash account to cover me in case the stock is put to me. So, I can't sell puts that would exceed my "available cash". Say, this is the CC for Dummies thread right? We got pretty far afield! ;) hm@just-make-us-some-money.com I actually don't think it's that far afield. I've been selling calls in an uptrending market, but this past month sold puts in a downtrending market (on a position that was called away from me in May). My thinking is that if I can repurchase a stock that I want to own at a discount, more power to me. I did run into a problem with selling puts in early April of 2000. I sold some on some overpriced (now I realize) stocks, and had them put to me at very high prices when the market crashed (QCOM at 140, GMST at 80, JDSU at 80, ELON at 90). So, now I'll only sell puts on stocks nearer to the bottom of their trading ranges. Dr.Id@enoughlessonslastyeartolastalifetime.pov