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Strategies & Market Trends : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: Michael Ohlendorf who wrote (58342)	2/23/1999 9:12:00 AM
From: Soumen Barua	Respond to of 58727

I assume I do not have to buy the stock since this would require a lot of capital one would always have to have available considering that a few contracts already equals a lot of stocks That is exactly what you need to have if you want to write uncovered calls and puts. Either you write covered calls and puts or have equivalent cash deposit so that you can write uncovered. Usually, the capital requirements for writing uncovered is higher than writing covered. I might be wrong. I hope that helps.

To: Michael Ohlendorf who wrote (58342)	2/23/1999 2:16:00 PM
From: otter	Read Replies (1) \| Respond to of 58727

In order to sell naked calls or puts you need to have the resources at hand to back up your trade if it goes south on you - which for all practical purposes means either the cash or other negotiable instruments. For exact requirements, you should speak with your broker who after it's all said and done will take action on your behalf and then nick you appropriately. That said, selling calls without the stock to back it up or buying puts without the cash to buy a stock that is could be put to you is, in my mind a very quick way to go broke fast.

To: Michael Ohlendorf who wrote (58342)	2/24/1999 11:36:00 AM
From: James Joyce	Read Replies (1) \| Respond to of 58727

Michael.. naked writing is ultra high risk. You should avoid it big time unless you have lots of options traing experience, the technical software needed to help, real time data feeds, low comish costs. The chance of exercise is not too high if the otions are very liquid (lots of open interest) as most traders do not exercise but trade the option again. If exercised you would have to buy the stock and then deliver it whcih would be a net wash on capital requirement but might cost you the comish to buy and then the comish to sell to the execisor. Your loss would really be tied to the loss incurred with the naked write. It is essential in a naked position to be right on top of any moves the underlying might make so you can react QUICKLY to get out of the position or roll it. I assume that you have studied McMillan IN DETAIL on follow up actions. Good luck James