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Motley Fool Pro / Pro: Catch-Up Trades


Subject:  Re: buy/write to catch up? Date:  1/31/2014  4:32 PM
Author:  proLon Number:  560 of 830

Hi Rob,

The biggest point of concern with put writing, when compared with covered call writing, is that Pro/MFO steer you towards getting a margin account, but in a margin account you can write puts that expose you to more than 100% of your cash balance. Compounding that problem is the way brokerages report the information to you, which tends to hide your actual exposure.

I have addressed this issue by keeping an ongoing spreadsheet of all my put writes. It allows me to quickly compare my put-writing commitments to my cash balance without the need for mental gymnastics. If I weren't using this spreadsheet crutch, I'd prefer covered calls simply to keep me straight on my commitments.

Those words of wisdom easily merited the rec and the repetition. Keeping track of one's commitments is always important (puts or otherwise). Like you, I maintain a spreadsheet that shows my put obligations, both total and monthly breakdown. It is part of my morning ritual to review that before placing any limit orders.

Really good advice!

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