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Strategies & Market Trends : Trading For A Living -- Ignore unavailable to you. Want to Upgrade?


To: Eric P who wrote (300)5/28/1998 12:01:00 AM
From: Marc D.  Read Replies (2) | Respond to of 1729
 
Eric,

> If you think it through, a short put will have the
> exact profit/loss value at expiration as a covered call
> at the same strike price.

Yes, but the SEC margin requirements for the naked puts can kill you in the interim. So many people like to play a bull spread with puts, i.e. selling the near the money puts and buying an equal number of far out of the money puts - it significantly reduces the margin requirements. I don't like buying something I think will expire worthless (the far out of the money put), so if I really think the stock is headed up, I'd rather play a bull spread by buying deep in the money calls and selling out of the money calls.

Marc



To: Eric P who wrote (300)5/28/1998 6:02:00 PM
From: R Stevens  Respond to of 1729
 
Eric,

If I you are as thorough in your software programming and system design as you are in your replies to my questions, then I think you are in for some big profits!

Thank You, RS



To: Eric P who wrote (300)5/29/1998 12:50:00 AM
From: Ira Player  Read Replies (1) | Respond to of 1729
 
There are a few circumstances where a covered call is a useful method.

1. Trading within an IRA is an example. Selling covered calls allows increased returns within the IRA. To my knowledge, this is the only option strategy allowed in IRA's.

2. When you believe the market will be ST weak to flat and you have a highly appreciated position you do not wish to pay taxes on yet. (;^)>

Don't dismiss the method out of hand. It has it's uses.

Ira