To: David Lawrence who wrote (24501 ) 11/24/1997 8:37:00 AM From: Glenn D. Rudolph Read Replies (3) | Respond to
In re naked puts vs. covered calls, I do both and it depends on the
situation. I've made a good deal of money writing covered calls against
Novellus, 3Com, SCI and others, and I've used naked puts as a way of
initiating an intended long position at a discount. However, a lot of
people don't have naked option writing privileges, even in non-qualified
accounts.
I do understand this. Once you have the stock long, selling and then writing the naked put is unproductive due to more transactions. I just could not get the point across on the COMS thread that a naked put has the same risk as a covered call. I also understand some do not have naked put writing priviledges.
As an aside, I expect more liquidity in the options markets as a result
of the new 18 month holding period for long term capital gains
treatment. More people will be using the options as a hedge to protect a
long (term) position, which is more easily justified by the wider delta
between long and short term rates. What do you think?
I agree completely. We are already seeing more securities becoming optionable and more with LEAPS to hold for the 18 months. I believe the delta will coontinue to increase on average.
I've made a lot of money writing naked puts and occasionally have written covered calls. The recent large drops in COMS and ASND have been he*l for me. Too much exposure. I am sticking to my program but lightening up on exposure.
One last note. As more and more people without experience start trading option, we see more market makers shaving an eight point from a market trade. Mose people are unaware that the market maker must exercise the first 10 contracts at the present bid or ask if the order is entered before the bid or ask changed. The high volitility lately has caused me to have to send inquireies and be re-embursed by the market makers by an eight on a market order. I typically do not do market orders but when stocks start gapping down, it is time not to play with a limit. The eight shaving is outright theft.
Glenn
