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To: Jeffry K. Smith who wrote (112005)	3/24/1999 10:40:00 PM
From: edamo	Read Replies (1) \| Respond to of 176387

jeffry...re:your broker's advice on puts.. the night has worn some of us down,,,chuz,pal,and myself...sig still going strong though...perhaps it's a hang over from today's intoxicating session... sell 95 put...buy 90 put...frankly speaking are you just looking for the spread?...let us see,dell common at 38... you get about 57 on the sale and give 52 on the buy...5 difference to your account..if at expiration the underlying is at 70...your sold put is at 25...your bought put is at 20....yep looks like a perverse spread...you get assigned at 95....you assign at 90... now the underlying at 100...your sold put at 0....your bought put at 0 ...by my late night obfuscated calculations...i'd get a new broker...don't think he is doing you any favors... OK GANG I'M VULNERABLE AND STAND TO BE CORRECTED...good luck, ed a. forgive me..i don't even know what level two is....

To: Jeffry K. Smith who wrote (112005)	3/25/1999 12:26:00 AM
From: Mr. Aloha	Respond to of 176387

These two cases are very different, in that the upside to "selling of a long term 85 PUT, and the purchase of additional shares at the current price" is much greater, but is also riskier. Selling a higher-strike put and buying a lower-strike put (Bull Put Spread) can be a very effective strategy, and is less risky than selling the higher-strike put naked, but you have to choose the right strikes. Selling a 90 and buying an 85 when the underlying is at 38 is crazy (if those strikes are even available). You only make money if the stock goes above 85 by expiration, as the premium difference will be more than offset by the spread and commissions. Your maximum upside is the difference in premiums (about $5 minus commissions). On the other hand, you can't lose much money, as it doesn't matter if the stock is at 85 or 0 at expiration. Your broker is right that this case is much less risk. The only one likely to win out is the broker on the commissions. I'm surprised he couldn't explain to you why it's not as risky. In the case of "selling of a long term 85 PUT, and the purchase of additional shares at the current price," if the stock goes to 85 or higher at expiration, you keep the put premium (about $85 minus current price) and your purchased shares have gone up substantially. Much bigger return than the $5 you would get only when the stock goes above $90. However, if the stock goes to 0 at expiration, you're screwed. You're out $85 minus the premium you collected, plus you're out whatever you paid for the additional shares. While this is unlikely to happen, it's not a pretty picture. If you had purchased protective puts, say at $30, in this last case you would have $30 times the number of shares. This may be the best scenario in that you have a pretty big upside and a pretty limited downside. This is what your broker should have explained to you. Bottom line is you get a bigger upside and a bigger downside when selling puts and buying shares, but if you're right and the stock goes up (or at least doesn't go down), you make much more money than the case you described. Mr. Aloha