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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: Herm who wrote (7922)	7/22/1998 9:29:00 AM
From: Mike Fredericks	Read Replies (1) \| Respond to of 14162

I have never really studied the math behind options, but I have a couple possible explanations. I've actually been told that puts are cheaper than calls in general. My thinking: 1) Market tends to go up not down, so if someone is writing a call they want more $ to cover their risk. 2) Writing a naked put has a finite downside risk: The strike price of the put * $100. Writing a naked call has an infinite downside risk, since it's (future price - strike price) * $100. Higher risk means need higher return. 3) There is a higher demand for calls. Put/Call ratio is always less than 1. I see things like .4 and .3. Higher demand = higher prices. Of course these are all conjectures and I have no math proof to say that any or all of these are accurate. -Mike