|
PureBytes Links
Trading Reference Links
|
<FONT face="Trebuchet MS"
color=#000080>Ben,
<FONT face="Trebuchet MS"
color=#000080>
the
strategy you suggest is not a covered call position. Through the sale of
this put you are changing the position into a vertical credit spread (bull put
spread). <FONT face="Trebuchet MS"
color=#000080>But if this was the intended outcome, then this goal can be
achieved much more simply.
<FONT face="Trebuchet MS"
color=#000080>
<FONT face="Trebuchet MS"
color=#000080>Suppose, at current prices, you are long 1000 QQQ. You sell 10 Apr
39 Calls at 1.00, and from that premium you buy 10 Apr 33 Puts at 0.50. The
price of this position is about $37,000. (about 18,500 in a margin
account).
<FONT face="Trebuchet MS"
color=#000080>
Now
compare this to the completely equivalent position of simply selling 10 Apr
39 Puts and buying 10 Apr 33 Puts. The net margin on this
position is about $3,700. No stock commissions are incurred,
either.
<FONT face="Trebuchet MS"
color=#000080>
<FONT face="Trebuchet MS"
color=#000080>Regards,
<FONT face="Trebuchet MS"
color=#000080>
<FONT face="Trebuchet MS"
color=#000080>Michael Suesserott<SPAN
class=132535021-13032002><FONT face=Tahoma color=#000080
size=2>
<SPAN
class=132535021-13032002>
<SPAN
class=132535021-13032002>
<SPAN
class=132535021-13032002> -----Ursprüngliche
Nachricht-----Von: profitok
[mailto:profitok@xxxxxxxxxxxxx]Gesendet: Wednesday, March 13, 2002
22:47An: realtraders@xxxxxxxxxxxxxxxBetreff: Re: [RT]
Managing covered call risk
<BLOCKQUOTE
style="PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000080 2px solid">
I do not understand why everyone is confusing the poor
man
keep it simple
if your call returns you $2 additional for
the stock but the stock goes down $4
then you still lost money
the answer is sell a call get $
2 credit
then go out and buy a put for 1/2 of your
credit
now you are fully protected and still have nice
income
(works best on qqq as strike prices are
1$ apart)
Ben
<BLOCKQUOTE
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
----- Original Message -----
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
Ray
Raffurty
To: <A
title=realtraders@xxxxxxxxxxxxxxx
href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx
Sent: Wednesday, March 13, 2002 4:22
PM
Subject: Re: [RT] Managing covered call
risk
Hi Steve,
You are right about naked puts being the same
as covered calls except in two regards. In most (all?) IRA's selling
naked puts is not permitted. Secondly for small accounts with limited
margin or accounts not approved for margin selling naked puts or calls is
not permitted.
In these cases, IMHO, selling covered calls is
much better than buying puts or calls.
Good luck and good trading,
Ray Raffurty
<BLOCKQUOTE
style="PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
----- Original Message -----
<DIV
style="BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: black">From:
<A title=MikeSuesserott@xxxxxxxxxxx
href="mailto:MikeSuesserott@xxxxxxxxxxx";>MikeSuesserott@xxxxxxxxxxx
To: <A
title=realtraders@xxxxxxxxxxxxxxx
href="mailto:realtraders@xxxxxxxxxxxxxxx";>realtraders@xxxxxxxxxxxxxxx
Sent: Wednesday, March 13, 2002 3:01
PM
Subject: [RT] Managing covered call
risk
Steve,two things. Suppose you own GE stock and
want to stay with it for the restof your life, or at least for the
long term, then selling covered GE callsmakes sense. Then these short
calls will give you additional income on stockyou want to keep
anyway.Otherwise, it is not be advisable to use this strategy
which will only makeyour broker happy. It is madness to purchase stock
just for the purpose ofselling calls against it, because you can get
the very same risk/rewardposition by simply selling naked puts
only.The unsuspecting public does not understand this. Even older
option traderswho learned their trade when there were no puts in
existence, don'tunderstand this sometimes. They willingly fork over
capital and additionalcommissions because there is an abiding
misunderstanding that covered callsare supposedly better protected
than naked puts. Well, they aren't. The riskis the same, because if
the stock in the covered calls positions goes south,it loses point for
point as much as the naked put does.Second, as to your question
about managing that risk, this depends on yourpain threshold. IMO, you
should place stops in both cases.If you sold naked puts, place a
(mental or conditional) buy stop on theputs.If you are in a CC
position, place a sell stop on the stock and aconditional buy stop on
the calls.Don't think you can really protect your capital by
selling more calls. Manypeople have found out about this the painful
way, not only in 1987 and 1989,but also last
year.Regards,Michael Suesserott>
-----Ursprungliche Nachricht-----> Von: schnakeus
[mailto:schnake1@xxxxxxxxxxxx]> Gesendet: Wednesday, March 13, 2002
20:30> An: realtraders@xxxxxxxxxxxxxxx> Betreff: [RT]
Managing covered call risk>>> Some of you were
talking about covered calls awhile back. How do most> of you handle
downside risk in the stock price? You own 100 shares of> XYZ at
$30. Say you sell a 32 strike a month out for $3. The stock> stays
the same or goes up. You keep the premium because of> deterioration
or because it gets called. If it goes down to $27> your'e even, in
theory, although call retains some value til exp. Of> course if it
tanks, you lose. What do some of you do to manage the> trade? Sell
a lower strike call? Have a GTC stop-sell on the stock,> then buy
to close? Any other methodology?> Opinions and ideas, Please and
thanks.>> Steve>>>> To
unsubscribe from this group, send an email to:>
realtraders-unsubscribe@xxxxxxxxxxxxxxx>>>>
Your use of Yahoo! Groups is subject to <A
href="http://docs.yahoo.com/info/terms/";>http://docs.yahoo.com/info/terms/>>To
unsubscribe from this group, send an email
to:realtraders-unsubscribe@xxxxxxxxxxxxxxxYour
use of Yahoo! Groups is subject to the <A
href="http://docs.yahoo.com/info/terms/";>Yahoo! Terms of Service.
To unsubscribe from this group, send an email
to:realtraders-unsubscribe@xxxxxxxxxxxxxxxYour
use of Yahoo! Groups is subject to the <A
href="http://docs.yahoo.com/info/terms/";>Yahoo! Terms of Service.
To
unsubscribe from this group, send an email
to:realtraders-unsubscribe@xxxxxxxxxxxxxxxYour
use of Yahoo! Groups is subject to the <A
href="http://docs.yahoo.com/info/terms/";>Yahoo! Terms of Service.
Yahoo! Groups Sponsor
ADVERTISEMENT
To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxxxxxx
Your use of Yahoo! Groups is subject to the Yahoo! Terms of Service.
|