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Ben,
your position is equivalent to a calendar spread
buy 20 March 34 Puts
sell 20 April 36 calls
You'd get the same risk/reward characteristics without having to tie up
capital in the purchase of the QQQ stock.
Regards,
Michael Suesserott
> -----Ursprungliche Nachricht-----
> Von: profitok [mailto:profitok@xxxxxxxxxxxxx]
> Gesendet: Tuesday, February 19, 2002 16:25
> An: realtraders@xxxxxxxxxxxxxxx
> Betreff: Re: Re[2]: [RT] Selling Covered Calls
>
>
> maybe an example will make everyone happy
>
> buy 2000 qqq at 35
> sell 20 April 36 calls at 2.4
> buy 20 march 34 at .75
> ----- Original Message -----
> From: "TheQuant" <thequant@xxxxxxxxx>
> To: "Daniel Goncharoff" <realtraders@xxxxxxxxxxxxxxx>
> Sent: Monday, February 18, 2002 8:53 PM
> Subject: Re[2]: [RT] Selling Covered Calls
>
>
> > Hello Daniel,
> >
> > Tuesday, February 19, 2002, 5:38:35 AM, you wrote:
> >
> > DG> When was selling covered calls (which is indeed similar to selling
> > DG> puts) discussed?
> >
> > I went back and re-read his post you are correct. However I have
> > trouble understanding the method. He sells calls, then understands
> > the risk so he sells tons of puts. Did he also have tons of calls or
> > a half a ton of calls. I think he has been lucky for 7 months?
> > What's the exact method or is it seat of the pants? Besides that Ric
> > brings up some very interesting points about the whole thing and read
> > Tom Bowen's most recent post. Especially the part about the audited
> > (independently)track record. If I only had a nickle for every bright
> > star that has claimed to have made "Tons of Money" trading.
> >
> > DG> I thought Ben was talking about a strategy that was more like a
> > DG> collar, if I understood it correctly. It seems to me that Ben's
> > DG> strategy is based on differences between real price movements and
> > DG> the pricing of options, which is usually done on the basis of
> > DG> probabilistic models. Whether you believe it works or not, his
> > DG> downside is limited, which makes it look a lot different than a
> > DG> naked short put -- more like a bull put spread.
> >
> > Bunk his downside is limited!, the way the post reads he had more puts
> > bought "Tons" then calls. Either way he could have lost on the trade,
> > contrary his broker is smiling.
> >
> > DG> Regards
> > DG> DanG
> >
> > What Ric writes below is an eye opener! He is absolutely correct!
> > People can get crazy I tell you trying to avoid risk but rather
> > causing self fulfilled prophecy of doom upon themselves!
> >
> > DG> ric ingram wrote:
> > >>
> > >> Hi,
> > >>
> > >> 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
> >
> >
> > --
> > Best regards,
> > TheQuant mailto:thequant@xxxxxxxxx
> >
> >
> >
> > 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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