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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: Jonathan Roy who wrote (10875)	5/22/1999 11:37:00 AM
From: Jon Tara	Read Replies (1) \| Respond to of 14162

Yes, you can buy options with money borrowed by initiating a margin loan. Let's say you deposit $10,000 in your account. You could buy 2000 shares of XYZ at 10, at a cost of $20,000, on 50% margin. Or, you could buy just 1000 shares of XYZ at 10, at a cost of $20,000, and you could then borrow $5000 that you can use for any purpose. It's up to you to decide what to do with that borrowed money - buy $5000 worth of some unmarginable stock, have them mail you a check for $5000, which you can use for anything you want (buy the remaining world-wide inventory of hula-hoops, forinstance...), or you can even buy $5000 worth of options. That is not "margining" the options, though, any more than you are "margining" the hula-hoops. The options are not pledged as collatoral on a loan. You aren't allowed to pledge options as collatoral on a loan.