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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: Dan Duchardt who wrote (10722)	5/11/1999 8:32:00 AM
From: Andeveron	Read Replies (1) \| Respond to of 14162

> We also know that writing a put is very different from selling > stock short, with a well defined limit (the strike price) on the > amount it will cost you to fulfill your obligation if the option is > ever exercised. Hi, excuse the intrusion. Naked put writing is selling a position against air and opens you up to risk if the underlying stock tanks. However, if you hold the stock and write puts against the position, would this be considered covered put writing? I.e, the value of your stock is essentially the "collateral" for the put and you are essentially covered against losses by the value of your stock? Or does the brokerage require that the writer deposit an cushion of money against losses if the put strategy goes against the writer? Thanks for any help in this matter as my broker won't allow my account to write puts even though we have the underlying stock in the account.

To: Dan Duchardt who wrote (10722)	5/11/1999 6:03:00 PM
From: KFE	Respond to of 14162

Dan, Having an IRA in a margin account is not what violates IRS rules, but using margin either by creating a loan or using securities as collateral for a loan is an IRS violation. If you borrow in an IRA the account loses its tax-exempt status. If you use part of the account as security for a loan the portion pledged is treated as a distribution. You are correct about the over-funding issue and that is why naked calls could never be done. Naked puts versus 100% cash(my favorite strategy)- I don't see how this violates IRS rules. Someone posted that a firm allows T-Bills instead of cash- wouldn't be legal since the T-Bills are subject to market fluctuation and this might create the over-funding issue you mentioned. When I was an ROP I didn't allow covered calls or nakeds in IRA's because the firm would not allow margin accounts in an IRA. At the time I don't think any other firms did either. I think that you can expect to see some IRS rulings soon as to speculative investments in general in IRA's. Good trading Ken