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<DIV>Hello all,</DIV>
<DIV> </DIV>
<DIV>I'd appreciate some input from those experienced in the strategy of selling
naked puts on stocks that are about to split. A friend of mine is convinced that
he can pursue this strategy with almost no risk to his account - hey, it worked
on paper, right? After all, stock splits make the price go up, right?
Apparently, this is the assumption on which the premise is based - I can't seem
to explain why a twelve-year bull market (let's not quibble) might skew his
back-testing.</DIV>
<DIV> </DIV>
<DIV>He has no experience in trading (naturally), and I've never done stocks -
so I can't seem to convince him that his idea of "rolling out" to the next
month's options and selling more, may entail not only some risk, but possible
account devastation, given a prolonged downtrend.</DIV>
<DIV> </DIV>
<DIV>Now he's convinced himself to give up twenty-five years of building an
insurance business in order to daytrade his way to wealth by year's end! At
least he's using one of the better systems for online trading that I've
seen recommended here lately, but come on! Today he found himself forced to roll
out to June options, and tells me he never loses! I remember when I thought the
same way at first, and how quickly retribution followed...</DIV>
<DIV> </DIV>
<DIV>Can someone please give me something I haven't thought to say that
might make him wake up? Or is this automatically going to fulfill his widest
get-rich-quick fantasies as he believes? I mean, hey, if it's that easy, I'll
give up commodities and sell a passel o' puts tomorrow!</DIV>
<DIV> </DIV>
<DIV>What happens if the holders of those puts exercise them? I'm pretty
sure it's going to do the same thing to him as selling silver calls in the
Buffet rush did to me when I first tried writing options (duh). Anyone out there
with some practical advice they'd care to offer?</DIV>
<DIV> </DIV>
<DIV>Dennis C.</DIV>
<DIV>dlc@xxxxxxxxx</DIV></BODY></HTML>
</x-html>From ???@??? Tue May 25 18:00:26 1999
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To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Subject: MKT - equity call to put ratio
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CBOE Equity Call to Put ratio would appear to favor the short side in the
immediate future.
BobR
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