--- In ConservativeOptionS
>
> and the market goes up. how do I profit?
>
> or is it better to buy a call and a put ATM? How do I profit?
>
IF YOU SELL A (CASH COVERED) PUT ATM AND THE STOCK GOES UP YOU WILL PROFIT THE AMT OF THE PREMIUM. IF THE STOCK GOES BELOW YOUR STRIKE PRICE AT EXPIRATION YOU HAVE TO BUY IT AT THE STRIKE PRICE, BUT YOU STILL MAKE THE PREMIUM. I WILL ONLY SELL A PUT IF I WANT TO OWN THE STOCK AT THE LOWER PRICE. FOR EXAMPLE XYZ IS $30 AND YOU SELL A PUT ATM AND THE PREMIUM IS $2 , YOUR COST WOULD BE $28 (NET COST.) AND YOU WOULD THEN OWN THE STOCK AND COULD SELL OPTIONS ON IT THE NEXT MONTH. IF YOU BUT A CALL ATM (PROBABLY EXPENSIVE PREMIUM) AN THE STOCK GOES UP YOU ALSO MAKE MONEY, BUT IF IT GOES BELOW YOUR ATM CALL, YOU LOSE WHATEVER YOUR PAID FOR YOUR CALL. A COVERED CALL IS FIRST BUYING THE STOCK AND THEN SELL A CALL AGAINST IT. IF THE PRICE OF THE STOCK GOES HIGHER THAN YOUR STRIKE PRICE YOU KEEP THE PREMIUM BUT ARE ASSIGNED ON THE STOCK (YOU HAVE TO SELL THE STOCK FOR THE STRIKE PRICE) BUT KEEP THE PREMIUM ON THE CALL YOU SOLD. I WOULD SUGGEST THAT YOU BUY A BOOK BY ALAN ELLMAN "COVERED CALLS" IT IS AVAIL ON AMAZON FOR ABOUT $20 AND IS AS GREAT INVESTMENT IF YOU ARE INTERESTED IN SELLING CALLS. 80% OF OPTIONSTHAT ARE BOUGHT EXPIRE AT EXPIRATION, SO MY FOCUS IS SELLING COVERED CALLS OR SELLING CASH COVERED PUTS.( A CASH COVERED PUT MEANS THAT MOMEY IN YOUR ACCOUNT IS HELD IN SORT OF ESCROW UNTIL EXPIRATION TO COVER THE COST IF YOU ARE ASSIGNED AND HAVE TO BUY THE STOCK.) YOU WILL HAVE TO SIGN UP WITH YOUR BROKERAGE FIRM TO GET PERMISSION TO SELL PUTS, BUT YOU CAN SELL COVERED CALLS IN YOUR RETIREMENT ACCOUNT. HOPE THIS HELPS. BOB
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