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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: accountclosed who wrote (37611)	11/27/1998 11:52:00 AM
From: Knighty Tin	Read Replies (2) \| Respond to of 132070

AR, Neither spread conversions nor buy writes (synthetic short puts, hold cash) are part of the 90/10 portfolio. They are part of my income portfolio. I only use money markets in the 90% part of 90/10, not the income from the income portfolio. The spread conversions are as low risk to cpaital invested as you can get in an income portfolio, though the income is more variable than it is for bonds. The buy and writes in the IRA, or short puts, hold cash outside the IRA, are much riskier. I am careful about the stocks on which I do a buy write. With a spread conversion, it is nice if the stock goes up immediately, but the premiums are the controlling factor, not the stock. I do use out of the money calls in the IRA for buy writes and short in the money puts in the regular income account. In the money, out of the money, or at the money depends upon the premium set up and how much I like the stock. ARC would be one I like for out of the money, as I also own the stock in the Cap App portfolio, so I obviously like its prospects. I never roll up. I prefer to unwind. Basically, as the stock goes up in value, the option gains absolute premium, but loses pure premium. In other words, using deltas as McMillan does, the call does not rise one for one with the stock. So, if I have a position in a Sangstat buy/write, as I did last month, when the stock has quickly risen 8 points, I was able to take 2 7/8 out of a $4 premium. I don't have the numbers in front of me. But it was something like this. I bought Sang at 19 7/8 and sold Jan 20 calls struck at $20 for the generous sum of $4. The stock ran and I was able to unwind the position at something along the line of $28 for the stock and $9 1/8 for the call. I made more than half my money in much less than half my time, a signal to punt every time. And, the stock fell again after that and I was able to double dip it and get back in on somewhat less favorable terms than the first trade. But still very nice terms. 3. The answer is yes on leaving myself with a free put. I sometimes unwind a spread conversion, or a reverse spread conversion, and keep the free option rather than sell it for the profit. Which, I transfer cash from 90/10 to income for the commission free "trade." MB