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

To: Marc Hyman who wrote (37687)	3/5/1998 12:44:00 AM
From: Gary Korn	Read Replies (1) \| Respond to of 61433

Ok, let me put it this way. It makes no sense to write a put if you believe the price of the underlying security is going to go down (unless you like giving away money :-). Writing a call in the same situation will net you the premium. Are you saying that there is no difference between a loss and a gain? Marc, 1. You are correct that it makes no sense to write a put if you believe the price of the underlying security will go down (below the strike price). Writing a put is a bullish exercise. 2. Writing a covered call in the same (bearish) situation also makes no sense and for the same reason: If you are bearish, you should have sold the stock rather than have kept it. 3. However, if one is inclined to stay in the stock, writing a put is very much the same as buying (or keeping) the stock and writing a covered call: When you sell a put, you net premium. This is no different than when you sell a covered call. 4. When you write a covered call, and the underlying security goes down, you lose money vis-a-vis the security. When you write a naked put, and the underlying security goes down, you lose money vis-a-vis the security, as it will be assigned to you at the strike price. Again, the same result. The advantage of the naked put is that, if the stock doesn't fall below the strike price (and with a conservative put you can have lots of points to work with before you fall to the strike price), you can use 30% of the equity that would have been required to buy the stock and write a covered call on it. Gary Korn

To: Marc Hyman who wrote (37687)	3/5/1998 8:24:00 AM
From: Glenn D. Rudolph	Respond to of 61433

Ok, let me put it this way. It makes no sense to write a put if you believe the price of the underlying security is going to go down (unless you like giving away money :-). Writing a call in the same situation will net you the premium. Marc, What do you get when you write a naked put? I will answer. You get premium. The same premium as if you wrote a covered call. If the underlying security goes down, you lose the same amount in either case. If the underlying security goes up, you gain the same amount. Are you saying that there is no difference between a loss and a gain? Of course not. I am not intending this to be rude. I am saying at this point you do not understand the positions. A covered call is a synthetic naked put and I am willing to wager any thing you like this is correct. I do not claim to know which way a stock will go and have the same problem as does many in having securities go in a direction I do not prefer. I do know options extremely well. I know just about every strategy that exists and use that as a way to buffer a possible loss and increase a gain. Take a covered call and a naked put position and compare on paper or wherever you like to write results with any amount of change in the underlying security. No matter what example you choose, the end value of that position will be identical. Glenn