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How much you need in your account depends on what you want to trade. You
can trade currency options with a lot less than $100k in your account.
Nick
-----Original Message-----
From: kohath [mailto:kohath@xxxxxxxxxxxxx]
Sent: Thursday, July 15, 1999 1:05 PM
To: realtraders@xxxxxxxxxxxx <mailto:realtraders@xxxxxxxxxxxx>
Subject: Fw: Puts and Calls
Yes, I believe that brokers that allow you to do these trades want $100,000+
in your account.
And you are right, in that going long/short, selling puts, calls, would be
beyond most persons ability to keep track of what the blank was happening
during the trade.
Selling puts/calls is exactly the opposite of buying puts/calls. Selling
gives limited profit, unlimited risk, buying gives limited risk, unlimited
profit. I would imagine there are those who have lost it all selling
options, in only a few hours. Think of it, you trade 12 times per year, and
put lets say $1,500 in your account each trade (sell). It only takes once
during the year for the stock to tank (selling puts), or rocket up (selling
calls) for you to easily lose $10,000+ against the $1,500 you made. If it
happens twice during the year, your goose is cooked. The odds, in the long
run, are stacked against you. I know someone who sold calls/puts for a
while and was making good money on the OEX. Well, one mistake is all it
takes. He sold calls before greenbacks lowered the Interest rate. Lost a
lot of money in the process. The market makers will not let you cover until
the initial run is done, and when it was announced the interest rates were
lowered, the OEX shot up like a rocket. Calls went from $1.5 to I believe
around $22 in an hour or so. Think about it.
----- Original Message -----
From: RAY RAFFURTY <mailto:rrraff@xxxxxxxx>
To: kohath <mailto:kohath@xxxxxxxxxxxxx>
Sent: Thursday, July 15, 1999 11:57 AM
Subject: Re: Puts and Calls
Hi kohath,
You are correct, but what you are describing is an "uncovered straddle
write" and involves 2 transactions, selling one call and selling 1 put. It
is profitable if the underlying moves very little before expiration and has
limited profit potential and unlimited risk.
What Dave was talking about was a "covered straddle write" involving 4
transactions, long stock, short stock (or long a put), short puts, and short
calls. I believe the costs of establishing such a position would be
prohibitive for the average trader.
Good luck and good trading,
Ray Raffurty
----- Original Message -----
From: kohath <mailto:kohath@xxxxxxxxxxxxx>
To: RAY RAFFURTY <mailto:rrraff@xxxxxxxx> ; pressdl
<mailto:pressdl@xxxxxxxxx> ; RealTraders <mailto:realtraders@xxxxxxxxxxxx>
Sent: Thursday, July 15, 1999 12:33 PM
Subject: Re: Puts and Calls
Correct me if I am wrong, for I am no expert in Options, but it seems that
if you sell a call and sell a put, you would want the stock to go exactly no
where to make money so that you kept the money that you received when you
sold and are not required to buy to cover at or before expiration. These of
course are naked.
If you sell a call you would want the stock to go down, and if you sell a
put you would want the stock to go up.
Kohath
----- Original Message -----
From: RAY RAFFURTY <mailto:rrraff@xxxxxxxx>
To: pressdl <mailto:pressdl@xxxxxxxxx> ; RealTraders
<mailto:realtraders@xxxxxxxxxxxx>
Sent: Thursday, July 15, 1999 10:53 AM
Subject: Re: Puts and Calls
Hi Dave.
What are you using to cover the put? When you write a put you must be
prepared to accept the stock and pay for it at the strike price you wrote.
If you are exercised you have no choice in the matter. With the covered
call you must deliver the stock if you are exercised, but you all ready own
it at a lower price than the strike you wrote.
Technically the only way to cover a put is with another put of an equal or
grater strike price. For margin purposes you can also cover a put by
shorting the stock. So to have both a covered call and a covered put, you
could own the stock, sell the call, short the stock (or buy a put) and sell
the put. Trying to figure if this would ever be profitable, with
commissions, is giving me a headache. Basically it would take an extreme
move in either direction to overcome the coat of setting up such a position.
There are times when it makes sense to have a covered call (own the stock
and sell the call) and BUY an out of the money put. This reduces your max.
risk to the difference in the two strikes. For example, recently you could
have bought AT&T (T) at about 57. You could have sold a leap Jan 02 $55
Call for about 15. You would be protected down to 42 (57-15). At the same
time you could have bought a Jan 2000 45 put for 1-1/4. Basically you have
insured your position against loss until expiration in Jan. 2000 when you
would have to buy another put if the position was still open.
Hope this helps.
Good luck and good trading,
Ray Raffurty
----- Original Message -----
From: pressdl <mailto:pressdl@xxxxxxxxx>
To: RealTraders <mailto:realtraders@xxxxxxxxxxxx>
Sent: Wednesday, July 14, 1999 9:17 PM
Subject: OPT: Puts and Calls
A question relating to options.. Is it ok to write covered calls and
covered puts on the same equity in my account (Same expiration date
--obviously different prices)?? Does it ever make sense?
Dave
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