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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Big Dog who wrote (141081)	10/15/2010 12:10:12 PM
From: The Reaper	Read Replies (1) \| Respond to of 206184

Naked puts can be done in a margin account with less than the $ required for full cash exercise. Takes something like 30% of the full cash exercise.

To: Big Dog who wrote (141081)	10/15/2010 12:16:32 PM
From: Salt'n'Peppa	1 Recommendation Read Replies (1) \| Respond to of 206184

"Naked Puts are the same as "cash covered" puts, therefore just as much capital is tied up, yes?" Big, you are mixing apples and oranges. Yes a naked put is basically a cash-covered put "if you get put the stock". If you buy back your put before expiry, your cash commitment is much lower, hence the leverage. Naked puts only require you to have a "maintenance" amount in your account. The danger here is trading your account too aggressively and leaving yourself exposed to a cash call if things tank, you don't cover for a loss, and you are "put" everything. For example, I am currently carrying a 10 contract naked put on APC NOV45's. My total commitment is $16,645 and the premium was $1,350 about 30 days ago. That is an 8.1% return on capital in 2 months, or just under 50% annualized. To do a covered call, one would need to own 1000 APC (it was $55 at the time) and place the option trade. Total commitment would be north of $55,000 in order to earn a similar premium to the naked put above. Return on capital is far lower unless the stock runs hard. Hope this helps, S&P