Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: ---------- who wrote (644)	1/31/1998 4:57:00 PM
From: Esteban	Read Replies (2) \| Respond to of 2241

Doug, Thanks for your thoughts. You have pretty much described what I want to do. 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% . My question about how to figure the percentage has to do with the case where you are not assigned the stock. In the above example what if Telebras surges past 115 before expiration and you were never assigned. You would not have had to buy the stock at 115-6 therefore you made 6 points on risk assumption only and not on capital outlay. Are you saying that you still base the percentage gain on the potential basis of the stock even if you don't actually buy it? Seems like at the very least you could have the cash in your account fully invested and sell the put with margin you don't have to pay for, unless assigned of course. Maybe what I'm really asking is does the broker set aside funds or margin in your account to cover the possible assignment? Is my question clear? Esteban