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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: NateC who wrote (9742)	2/25/1999 2:48:00 AM
From: VincentTH	Read Replies (2) \| Respond to of 14162

Nate, OT: Shorting Shorting, IMHO, requires twice as much work as going long, so I opted to play the short side only when the market is weak, like it is currently. I hope to offset the long positions for which a sale would mean real loss (as compared to paper loss). Yeah, I know I should have sold them earlier, but that's another story. Now, the relationship between short, long, put and call. The following statement is true AT EXPIRATION TIME: stock = call - put and you can transpose any term just like in algebra. where a positive sign means a long position, and a negative sign = short. So the statement says long stock = long call + short put. you asked: If you had sold puts on a stock...which headed south....say you owned 1000 shares of XYZ at 93.....and you sold the 90 March puts........ That is equivalent to doubling your position (assuming you sold 10 puts) + selling 10 calls. stock - call = -put (transpose call to the LHS) Re: can you explain a little about what happens when you go short. If you have sold 10 contracts of March 90 Puts from stock = call -put - call = -put - stock So if you are short the stock and also sold an equivalent amount of puts, you are effectively selling the call naked. If you are shorting the stock and the position has appreciated, and you want to lock in the gain, buy a call: -stock = put - call -stock + call = put. The positions then has the same characteristics as a put. If the stock goes up, you just loose the premium of the call (assuming the call strike is near or lower than your short entry price). If the stock goes down, your gain will go up but you loose the call premium. Another strategy, especially when you are not sure about the market direction, is to box your short position (buying an equal amount of stock as your short position) in a different account. If the stock move up, you can expose your short position by selling the long position (and pocket the profit) and vice versa. I hope this answers the question someone asked about the advantage of a box position. I hope I did not confuse you too much. :-) //V