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Strategies & Market Trends : P&S and STO Death Blow's -- Ignore unavailable to you. Want to Upgrade?

To: Mike M who wrote (22781)1/8/2003 9:16:32 AM
From: mishedlo  Read Replies (2) | Respond to of 30712
 
You are quite simply wrong.
Look up ANY book on options.

The gain/loss up to the time you wrote the covered call is irrelevant.

At the time you place the covered call, you would have an identical play (in risk/reward) by selling the common, sitting in cash and writing a naked put.

The key is what you said.
As soon as you write the CC your upside gain from that point on is limited. Gains form sale of naked put are limited as well. The risk/reward scenario is nearly IDENTICAL.

Look in any book, ask CBOE, but there is absolutely positively no way I am wrong on this.

M



To: Mike M who wrote (22781)1/8/2003 11:12:18 AM
From: Win-Lose-Draw  Respond to of 30712
 
with the naked put trade you can also participate in any future recovery because you are sitting on (mostly) cash instead of sitting on the stock itself.

mish is right, they are the same thing. where naked puts are more dangerous is if a trader loses discipline and overextends.

just ask DELL's cfo. -g-


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