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Hello
I really do not understand what is the big deal here
Unlike stocks where you have 5$ between strike prices,,
qqq has only 1$ between strike prices
SO
if it goes up you make money in 1 month 8-10 times of what the bank
pays,,
(yes limited to premium collected minus cost of put protection),,
if it stays the same at expiration you still make 6-8 times of what bank
pays,,
if it goes down you recover loss of principal from the put selling to close
,,and STILL collect the call premiums,,
and net is call premium minus put cost,,
NET NET still 1200-1400 a month on a down month for each 1000 shares
so far on 2000 shares I have netted AFTER commission $4400 monthly
hope this clears all aspects
Ben
----- Original Message -----
From: <stansan@xxxxxxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Tuesday, February 19, 2002 11:35 AM
Subject: Re: [RT] Selling Covered Calls
> Ric Ingram's verbose argument that selling covered calls
> is quivalent to selling a naked put is nonsense in its simplest form.
>
> When one sells a call, covered or otherwise, he obligates himself
> to GIVE stock to the call buyer - that's why it's "called".
>
> When one sells a put, naked or otherwise, he obligates himself
> to TAKE stock from the put buyer - that's why he's put the stock..
>
> In both cases the options have to be exercised.
>
> Furthermore his concept of parity between puts and call prices
> for a given option (strike and expiration) makes for a long story
> but misses the reality. Call pricing will differ from put pricing
> (for a given option) because the cost of carrying.
> This is not worth discussing because the differences are small.
> I just want to clear up his mis-perception.
>
> Stan R.
>
> In both transactions
> ----- Original Message -----
> From: "ric ingram" <ringram@xxxxxxxxxxxxx>
> To: <realtraders@xxxxxxxxxxxxxxx>
> Sent: Tuesday, February 19, 2002 3:01 AM
> Subject: [RT] Selling Covered Calls
>
>
> > Hi,
> >
> > recently, related to QQQ, there has been talk of covered call selling.
> >
> > Selling covered calls is a popular strategy, often recommended to
> > conservative investors in stocks.
> >
> > Like all strategies there is a time, place, and appropriate audience.
> >
> > If you have studied options you will know about put-call parity. This
is
> > the equivalence equation that helps keep the prices of puts and calls
at
> > the same strike at the same maturity strongly tied with each other -
> > otherwise arbitrageurs, looking for a risk free (but not capital free)
> > profit, enter the market to help make the prices come in line within the
> > limits of trading expenses.
> >
> > The equation that relates the prices of a put (P) and a call (C), at the
> > same strike and the same maturity to their underlying security (U) is:
> >
> > U = C - P
> >
> > Reassembled this is U - C = -P
> >
> > So holders of the underlying who sell covered calls are performing the
> > equivalent of selling a naked put.
> >
> > Now most conservative investors would run a mile (rightly or wrongly) if
> > you suggested they sell naked puts, but that is what they are doing when
> > they sell covered calls.
> >
> > It is truly amazing how greed can get some people to initiate positions
> > that if they understood their fear would stop them doing.
> >
> > But some people have a real perception problem - and do not know it.
> >
> > It is only reasonable to point out that given that you intend to hold
the
> > underlying, selling a covered call actually reduces your exposure to a
big
> > fall. So if you were going to hold the underlying anyway, selling
> covered
> > calls can be considered a conservative strategy.
> >
> > However if you do not hold the underlying or do hold it but do not
intend
> > to keep it, buying the underlying and selling a covered call is the same
> as
> > selling a naked put.
> >
> > Paradoxically, selling naked puts is actually lower risk than holding
the
> > underlying if you allocate the same capital as you would have done for
> > holding the underlying.
> >
> > But rationality is rarely a bedfellow with fear or greed.
> >
> > Unconditionally yours, Ric.
> > www.traderscalm.com
> >
> >
> >
> > To unsubscribe from this group, send an email to:
> > realtraders-unsubscribe@xxxxxxxxxxxxxxx
> >
> >
> >
> > Your use of Yahoo! Groups is subject to
http://docs.yahoo.com/info/terms/
> >
> >
>
>
>
> To unsubscribe from this group, send an email to:
> realtraders-unsubscribe@xxxxxxxxxxxxxxx
>
>
>
> Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
>
>
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