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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: MCsweet who wrote (14355)	4/20/2002 11:45:46 AM
From: Wyätt Gwyön	Respond to of 78523

i also use naked OTM puts on stocks i want to own, in margin acct. in IRAs, i can achieve the same by doing a buy-write on an ITM call. e.g., WMI underlying at ~26; May 25 call at 1.50 bid so net debit is 24.50 with 25 cap. similarly, the May 25 put is at .50, which works out to the same effective buy-in price if put of 24.50. theoretically, the put should provide less money than the buy-write (since the put requires less capital up front), but i have noticed sometimes the reverse is the case. i think one problem people can run into with naked puts is if they write a whole slew of them (with a notional value exceeding the amount of underlying they'd want to purchase at the put price). i sold some puts on WMI when the vols went way up about a month ago after an SEC announcement shook the stock.