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Strategies & Market Trends : Options for Newbies -(Help Me Obi-Wan-Kenobe) -- Ignore unavailable to you. Want to Upgrade?

To: Esteban who wrote (643)	1/31/1998 4:01:00 PM
From: ----------	Read Replies (1) \| Respond to of 2241

Esteban: I must warn you, the way I do it, and the way anyone else does it may be different. When I sell a put, I do so only because I want to own the stock. For example, Telebras closed at 111. I could buy Telebras at 111 OR sell a 115 put @ 6. If it is put to me, my cost is 109. I save $2.00 a share. If Telebras surges past 115, in effect I bought the stock at 109 & sold it at 115. That is $6.00 in 21 days, or 5.5% based on the 109 price. Annualized that is about 82.5% . I've never written a naked call, and never will. My resources are limited. The idea of taking a position with unlimited potential losses scares the Hades out of me. I've bought stocks & sold covered calls, fully expecting the stock to be called away. Dell is a good example. (NOT a recommendation, just an example.) Their option premiums are high. If I can buy the stock, write the call, and have it called away, it will typically bring in about 10%-14% in a month. If Dell goes in the toilet, I write another call. If Dell really plunges, then my whole idea was a complete disaster. <g> Hope this helps. I'm sure others here will have a far better mathematical approach. I keep things simple.... if I end up with more pictures of dead presidents(money), than I started with, I consider it a good trade. Doug