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Strategies & Market Trends : DAYTRADING/SWINGTRADING STOCKS with INTRADAY INVESTMENTS -- Ignore unavailable to you. Want to Upgrade?

To: deronw who wrote (332)6/25/2001 10:49:30 PM
From: Mark Davis  Read Replies (2) | Respond to of 565
 
While you are accurate in saying that you are collecting premium when selling calls, it also needs to be said that you are also taking on 'unlimited' risk.

A shock event that takes the stock up will cost you dearly, probably more than you intended to risk. Puts define your risk up front and avoid that scenario.

Of course, this may not happen very often, and selling calls may be the preferred strategy over time. During the raging bull market, call sellers were decimated. Market's a little better now for that strategy.



To: deronw who wrote (332)6/26/2001 8:51:10 AM
From: Ramsey Su  Read Replies (1) | Respond to of 565
 
Deron,

thanks for explanation.

I guess my question should be why short the stock vs a in the money put with no or very little time premium.

In the case of IBM, my bet is that they may warn during the current warning season. Selling calls would limit the profit potential tremendously.

Comments?

Ramsey


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