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To: edamo who wrote (104256)	2/23/1999 4:10:00 PM
From: GVTucker	Read Replies (1) \| Respond to of 176387

edamo, in response... <<out of ignorance, how does getting cash in by selling a put give a cboe trader free money>> In the example that was cited, PAL sold a put and purchased a call of the same strike and expiration. The trader would take the other side of both of those trades (go long the put and short the call) and also buy the stock. This is a risk free trade from the CBOE trader's perspective. The return when the options expire exceeds the cost of establishing the position, and because the trade is risk free, the margin (and thus cost of capital) is minimal. Real world examples are easy to cite, if need be. <<i think it reckless to use margin to go long...can turn against you immediately on a day like 10/8/98...whereas put positions can be restructered swiftly without loss of position...and most times with a benefit of cash in..>> Bunk. A short put has the same maintenance requirement as a margined long position--30% of the underlying common. The risk on the downside is exactly the same, and with the long call, the upside is the same, too. As far as put positions being 'restructured swiftly,' given that we are talking about a synthetic long position, anything that you could do to restructure and reduce a maintenance call with a short put could also be done with a margined long position.