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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: David Wright who wrote (10774)	5/13/1999 3:00:00 PM
From: tuck	Respond to of 14162

David, I, too, would self-impose a hefty margin requirement. But, since a stock is unlikely to go all the way to zero, I probably wouldn't require myself to put up the entire (stock price - put premium) amount. For instance, if in my worst-case scenario I'd expect the stock to drop no more than 75%, and I kept an appropriate amount in the account to cover that possibility, then my position would be the same as my usual CC position. That is, I only allow myself to use half my available margin on a CC, because that seems to keep the margin calls away if the stock tanks for a bit. And this parked money would be earning interest, whereas in the CC I am paying it. Unless the brokerage still considers the naked put position to be somehow margined. This is what I am still unclear on. I need to do some more homework there. Excuse me while I haul out McMillan. Cheers, Tuck