No. of Recommendations: 2
Can you explain what you mean. Are you describing selling puts versus covered calls?
If you sell 1 put for XYZ and the price goes down $20 [below the strike price] your down $2000.
If you own 100 shares of XYZ and the price goes down $20 your down $2000.

Whats the difference?


Cash flow. With the call you have an unrealized loss (a paper loss); you still have the shares. With the put you have a realized loss (a loss of cash). If this happens when you are short on cash in the account you get a margin call which can start a chain reaction, selling stuff to meet the margin call. No such thing can happen with covered calls.

Selling puts is like going into debt, you make good money on a bull market but lose cash in a bear market which is what makes it risky.

Denny Schlesinger
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