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

To: Uncle Frank who wrote (1942)	8/12/2001 3:17:49 AM
From: Mathemagician	Respond to of 5205

<iOverlooking the fact that Roth describes the underlying assumptions appropriate for strangles as very bullish, if one alread had some stock, wanted more, and was neutral to slightly bullish, wouldn't buying the stock and writing slightly otm ccs be an effective approach? If you prefer CC to writing puts for whatever reason, then by all means. However, it has been shown that writing puts uses capital more efficiently than CCs. Even Roth agrees to that! ;) >> "In theory practice is a lot like theory, but in practice it's not." Roth's CV included stints at Drexel where he headed their options department and Cowen & Co. as VP and chief options strategist. Maybe his practical experience is why he described the underlying assumptions appropriate for strangles as very bullish. Agreed. He was likely taking into account the fact that it is fairly easy for an investor to become enamored with the idea of collecting two premiums and overcommit when using a strangle. I read it as an admonition to be especially vigilant when choosing the underlying and determining one's acceptable level of exposure to it. This admonition is made all the more necessary due to the fact that his book is intended for dummies like us. dM