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

To: Mathemagician who wrote (2683)	10/14/2001 4:02:55 PM
From: Dan Duchardt	Read Replies (1) \| Respond to of 5205

dM, Uncle Frank, If I might butt in here with a hopefully helpful observation: I have not gone back to Roth to check the context of his remarks, but I do know from careful examination of covered call vs naked put strategies that the two are equivalent only in the case of cash secured puts. For uncovered put writing to be a "superior" strategy, it must not involve tying up the exercise price in cash, and in that case the truly naked put is a far more risky approach than the covered call. A covered call, or cash backed short put can never send you looking for "new" money to cover your loss in the position. A naked put can send you scrambling for money you might not have to cover the assignment. I find the Roth statement you quote here to be misleading and even contradictory if you take "very similar to" as meaning some sort of equivalence. You cannot have both the equivalence and the superior reward/payoff of the naked put. Dan