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Technology Stocks : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: George Coyne who wrote (37508)	3/4/1998 12:36:00 PM
From: Glenn D. Rudolph	Read Replies (2) \| Respond to of 61433

Greg, I used to think as you are, but I've come around to Glenn's thinking. Consider what happens in the limit in either direction. DOWN: The underlying stock goes to 0 (zero)from 20. If you have sold one 20 Put contract, you lose $2000. less your premium. If you sold one 20 covered Call contract, you lose $2000. (the stock value)less your premium. UP: The underlying stock goes from 20 to 40. If you have sold one 20 Put contract, you make your premium. If you sold one 20 covered Call contract, you make your premium (and DON'T get to keep the appreciation, since your stock will have been called away) Make sense? George, It makes sense to me. You explained it better too. Thank you. The positions are identical except the investor also has their money tied up in the underlying security with a covered call. I suppose we could make an execution argument for both. If you already own the underlying security, you only need to make one trade to complete the covered call. If you do not own the underlying security, The naked put would create the same postion with one trade in place of two. Finally, IRAs do not permit naked puts. Glenn