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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 (9299)	12/26/1998 10:46:00 PM
From: FR1	Read Replies (1) \| Respond to of 14162

Herm - Maybe you can set me straight on this. I noticed that just recently several brokerage houses have changed their margin requirements - presumably due to some change in regulations. For example, at Fidelity they have decided the house margin requirements for internet stocks like AMZN, YHOO, LYCOS, etc - are bumped up to 70%!! While other stocks, like DELL, IBM, etc are solid bets and good down to 30%!! This means that a lot of people are getting margin calls on portfolios that are going up. I have some internet stocks at Dreyfus and got a house margin call even though the stocks have done nothing but gone up. Same with Fidelity. When I asked Fidelity which stocks have what margin requirement they said there is no way to tell and I had to call and ask. It sounds like it is all tied to the option premium and it is designed to discourage irrational exuberance in internet tech stocks. This doesn't sound good at face value. I always thought that if you kept yourself at around 50% margin, did your homework and invested correctly, you would be rewarded. Now it sounds like if you keep yourself at around 50% margin and you invest correctly you will get a margin call - because your stock will go up, the premium will go up and your margin requirement will go up. Especially bad news for people that have been holding good stock with a steady appreciation for a long time. If the stock suddenly starts to move they will be forced to sell and pay the capital gains. Have I got this all wrong? It seems that the margin requirements should be at X% and all stocks treated equally. The market will reward the winners and punish the losers. It's not up to NASDAQ, or somebody, to decide which stocks are favored. I assume this change, if it is real, has no impact on option transactions, since you buy and sell in cash, but your underlying portfolio that supports your calls and puts might me more at risk.