Option Mystery

[stock777]

Try this you're feeling masochistic. Go into a public chat room and say "writing covered calls is the same as selling puts"

At least one moron will tell you you're wrong, and defend it to the death.

 

[metooxx]

That is why he is a moron ...

 

[Pabst]

I have a friend who is a pretty savvy institutional Treasury trader. He would constantly simultaneously buy bonds and sell calls. When I would castigate him by reminding him that he could save commissions and some slippage by just selling puts, he would reply "I always feel better knowing I'm covered!"

 

[def]

are you talking 1:1 ratio? if not, then we can have some fun

 

[Avaturk]

Try telling one of the new short sellers that selling a call and buying a put is superior to shorting stock. "But the call is uncovered!"

 

[stock777]

Originally posted by def
are you talking 1:1 ratio? if not, then we can have some fun

Yeah. But just for kicks, what did you have in mind?

 

[def]

since you're talking 1:1, i'm not going to bother. too tired and too lazy.

 

[Quah]

Originally posted by stock777
Try this you're feeling masochistic. Go into a public chat room and say "writing covered calls is the same as selling puts"

At least one moron will tell you you're wrong, and defend it to the death.

You are wrong. One is selling covered calls. The other is selling puts. Two totally different things.

 

[OPTIONAL777]

Originally posted by stock777
Try this you're feeling masochistic. Go into a public chat room and say "writing covered calls is the same as selling puts"

At least one moron will tell you you're wrong, and defend it to the death.

What if you are writing covered calls on a stock that has a nice dividend? In that case, you will make more with the covered call writel than the short put (assuming equal premiums on the calls/puts), depending on when the dividend is issued of course and the duration of the option position during dividend issue time frames.

The main advantage of covered calls over naked puts is in dividend accumulations, and typically, you get more for the calls than you do for the puts.

The disadvantage, is that you have to pony up the jones to buy the stock to write covered calls on, and naked puts require a lot less cash/margin.

Perhaps when we see SSF, there will be less writing of puts and more outright shorting of the SSF on the stock.

I am very interested to see how the SSF plays out, and how it influences options strategies. I can envision some very complicated and sophisticated strategies with the combination of a stock position, a SSF position on the stock, and an option strategy combined.

Also, wondering what type of spreads we will see with SSF, i.e. going long XOM and shorting CVX.

 

[def]

last comment from me on this one....

optional777,
Think about it, if your selling a call or a put, wouldn't you factor in dividend payments? The put value will have the dividend factored in.