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To: Bicycle who wrote (74375)11/2/2007 8:46:20 AM
From: GVTucker  Respond to of 77400
 
Bicycle, RE: Writing naked puts exposes the investor to identical risks and rewards as writing covered calls.

Your definition of "identical" differs from mine.

Writing a naked put is a bullish strategy. Writing a covered call is bearish.



To: Bicycle who wrote (74375)11/2/2007 8:48:41 AM
From: Elroy  Read Replies (2) | Respond to of 77400
 
Writing naked puts exposes the investor to identical risks and rewards as writing covered calls. The key difference is the prices.

Writing naked puts is much more risky than writing covered calls. If you write a naked $30 put on a $30 stock, and the stock falls to $2 (it happens!), you have to buy the stock which is worth only $ for $30 from the put holder, and you lose $28 per share minus whatever premium you received for the put.


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