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Strategies & Market Trends : Options 201: Beyond Obi-Wan-Kenobe -- Ignore unavailable to you. Want to Upgrade?

To: Thomas Tam who wrote (54)	8/16/2001 2:34:12 PM
From: edamo	Read Replies (1) \| Respond to of 1064

Thomas...in a market with a downward bias, the put sale offers a bit less risk then the buy/write... i liken it to a roller coaster ride....the ride is in progress, you could either buy a full price ticket(buy), get a discount(write)jump on in motion, but not know when the ride ends....or you can have the amusement park pay you(sell put), get on at the same time and ride till it stops, or till you elect to get off....if the ride stops before you get off then you pay not for the full price ticket but a discounted ticketed(assignment) and get a further discount(call write) when you get on.... i'm confused , so you must be...in essence if you are unsure of direction, but tend to think long, best to lead off with the put sale and let the ride take you to where its going! ed a. p.s...and with jnpr plunging, i'm still comfortable with an underwater position, that won't cause me to swallow water until i'm assigned...meanwhile i'll try to reduce cost through premiums, and perhaps add some naked calls...

To: Thomas Tam who wrote (54)	8/16/2001 6:09:30 PM
From: PoetTrader	Read Replies (1) \| Respond to of 1064

Thomas...that was one I was looking at, but I can't write naked puts in my account yet...and online application on Fidelity isn't working to avail myself of that specific option level. Anyone else have Fidelity and try to raise their option level on line? Did you get your .50 or .65 price? Best and Good Luck, PoetTrader

To: Thomas Tam who wrote (54)	8/17/2001 10:49:01 PM
From: Dan Duchardt	Read Replies (2) \| Respond to of 1064

Thomas, However, are you comparing apples to apples when you consider a buy/write at 46 for JNPR (don't know which call you are writing) and a put sale of the Jul 35s. It would be apples to apples if the comparison were a buy-write CC at the same strike price as the puts, in this case 35, assuming the puts are backed by cash enough to meet assignment. Your example with everything at 45 of course also has equivalence, but that is a special case of the more general one. Selling the puts OTM or the calls ITM when the stock is higher captures a relatively small premium, but increases the likelihood of keeping it. The advantages of put writing is increased leverage if you don't keep the cash in reserve (and increased risk), and that if the trade is "successful" the puts expire worthless so no additional transactions are needed. Are these what you mean by "marginally better", or did you have something in addition or different in mind? You can often capture more premium with the buy-write CC because the interest rate on the cash is factored in to the option prices, but that may not be enough to offset transaction costs. Dan