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Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: OldAIMGuy who wrote (6776)	2/5/1999 4:42:00 PM
From: LemonHead	Read Replies (1) \| Respond to of 18928

What happens if the price of the PUT option closes at or below $55 in June? Well I still keep the $1150 but have to buy 200 shares of stock at $55 to cover the contract obligation. What if the price closes at $45? Do you pay the $55 or the below price? Thxs Keith

To: OldAIMGuy who wrote (6776)	2/5/1999 5:39:00 PM
From: D VanSwol	Read Replies (1) \| Respond to of 18928

>> What happens if the price of the PUT option closes at or below $55 in June? Well I still keep the $1150 but have to buy 200 shares of stock at $55 to cover the contract obligation. So what's my actual cost per share? Let's see. I pay $11,000 for 200 shares of stock plus normal commissions - let's use $50 for this example. My cost is then $11,050. Wait a minute, I also took in $1150 in "insurance premiums" before this. So, my net cost is $9,900 or $49.50 per share! I've just made a buy at about 10% less than I would have otherwise.<< So if the stock closes below $55 you go ahead and buy the AIM directed shares whethter or not the PUT shares get called? Are you in effect selling naked PUTs since you don't yet own the shares you plan to buy at $55 IAW AIM? I've traded options (on the buy side), but haven't written options on stocks I own. I understand the basics of the mechanics trading options, I just wasn't sure how to execute the writing of an option on shares I own. P.S. This writing of PUTs or CALLs sounds a little like a variation on the use of stops rather than using Vealies. --Dennis-- Edit: Tom - I've been mostly lurking of late because I usually so behind in reading posts, I feel that when my response gets posted, it would be too far out of context with the conversation at the time my post would finally show up.