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

To: Mathemagician who wrote (1903)	8/10/2001 5:25:31 PM
From: BDR	Read Replies (1) \| Respond to of 5205

<<We now own two positions which "have the same risk/reward profile", yet the risk of one is "moderate", the other is "comparable to stock ownership", and the two together is "intense".>> My (humble) interpretation of why Roth feels that a combination is more intense than owning stock outright comes from the assumption that the holder of the stock has now doubled his exposure to downside movements in the stock's price by adding an equivalent number of puts. If the capital at risk, assuming the worst case and the stock goes to zero, in owning 100 shares is X then the risk of owning either 100 shares and one put or 200 shares is 2X (less the premiums of any puts or calls one has written to establish the combination). The more stock you buy or the more puts you sell the more you are exposed which is what I assumed he meant by the position being "more intense" than stock. Is it more complicated than that?

To: Mathemagician who wrote (1903)	8/10/2001 6:43:16 PM
From: Uncle Frank	Read Replies (2) \| Respond to of 5205

What does McMillan have to say about the appropriate underlying outlook for strangles and the associated risk profile? duf

To: Mathemagician who wrote (1903)	8/10/2001 7:12:57 PM
From: alanrs	Respond to of 5205

FWIW, I view Roth's book as an good basic introduction to the mechanics of some options strategies. His analysis, however, is unreliable and should be taken with a grain of salt. I haven't read the book-still only 3/4 of the way thru McMillan, which tends to make my eyes glaze over- but some of the quotes I've read here don't jibe with the risk/reward graphs of those strategies. Personally, I hate to see the pissing matches. It does seem that there are some very easy extensions of the basic covered call that have better profiles. Be that as it may be, I'm glad Dan started the new thread so that peaceful co-existence can be restored. I expect I'll read both. ARS