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To: edamo who wrote (112268)	3/25/1999 1:58:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Edamo, I agree with much of what you say, but I take strong exception to this statement: ignore the numbers on a single trade. I believe that the only way to evaluate the kind of position you recommend building is to disaggregate the pieces. Thus, the question becomes is selling a cash secured put more or less risky than buying the underlying stock. Proper analysis, and hence the answer, depends entirely on setting equivalent starting points, and should be phrased as "Is it more or less risky to sell 1 contract or buy 100 shares". The potential loss is limited in each case. In the former case it is limited to the difference in the striking price less the premium received, while in the latter case it is limited to the cash invested in the stock. The issue that swings the mitigation of risk in the case of the sale of the put is that the cash received may earn interest at a risk-free rate (say 4%). Now, if I remember the original numbers we were talking about, the sale of a 2001 85 put netted 46.50, meaning that the risk in the position at its inception was $38.50. But the accrual of interest during the holding period decreased the at risk position by $3.30 (which is 21 months' worth of interest on $46.50). I believe that in effect your approach simply sidesteps (and perhaps reverses) the interst charges on using margin. Using the cash derived from the sale of the put leverages your position, but it adds to the risk dollar for dollar. TTFN, CTC