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Technology Stocks : 3Com Corporation (COMS) -- Ignore unavailable to you. Want to Upgrade?

To: Glenn D. Rudolph who wrote (10744)	11/23/1997 5:43:00 PM
From: jgercke	Read Replies (1) \| Respond to of 45548

Here's my 2 cents worth. Writing naked puts results in the position being "marked to market" and margin recalculated each trading day. Writing calls against a long stock position does not get treated the same way. The calls are covered by the long stock and do not ever require additional margin. The margin for the stock is governed by its purchase & current prices. The point being that witing naked puts which move against you can result in immediate additional margin requirement; writing covered calls does not result in additional margin unless the stock price violates maintenance levels. Usually that requires 30% equity (as compared to the 50% equity to purchase), although many volatile stocks have higher house maintenance levels. This is relevant generally to investing becasue once you generate a variety of "comparable " strategies which reflect your market outlook for the security, and carry approximately the same risk profiles, often the most effectively leveraged position is the one that is most attractive - and hopefully - profitable to implement. Having said that, and having written Nov 35C against my long stock, isn't it cute how COMS closed Fri at 34 15/16 x 35 ??

To: Glenn D. Rudolph who wrote (10744)	11/23/1997 6:49:00 PM
From: Beachbumm	Read Replies (1) \| Respond to of 45548

Well, I'm not confused. I was simply supporting Carmine in what I thought was his assertion that naked put writing is riskier than covered call writing. I believe the fact that brokerages require a higher level of option approval for the former demonstrates this. (Although I understand your view that they are similar trades.) Yes, you can buy back your put if the stock price is declining, but you can't be completely sure that you haven't already been put the shares, so it's possible your buy order could be rejected. Do you use stops when writing naked puts? Just wondering. I know that in reading your posts you have said that you were put many shares. I think the covered call writer has more flexibility in what to do with a deteriorating stock price. Beachbumm