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Wasn't sure where else to post this. TMFJeff (the author of the recent series on options) seems to hang out here the most.

I have understood options for quite some time. However, I've never traded them. Mostly just laziness, I suspect, at dealving into the mechanics of actually using them. The two strategies that make sense to me are writing covered calls, and selling puts. It's one thing to understand what the option is, it's another to give the correct instruction to a broker to achieve what you want.

So, if I want to write a covered call, how do I accomplish this with (for example) Scottrade (online)? I've found the CBOE site (and read their learning materials at various times over the past several years, including again today). Is it as simple as saying that I want to sell ticker INQ AF-E (Intel jan04 30), for example?

And if one wants to buy stock, why would not EVERYONE sell a put to do it? What's the downside? I don't see any if I want to own the stock and would be placing a limit order normally. Seems to me that selling a put is the same as placing a limit, except they pay me to do it. Mechanically, is it as simple as logging into the online brokerage and saying I want to sell UQD TZ-E (JDSU aug03 2.50)?

And in both cases, do I specify shares or contracts (with the knowledge that if I do shares I have to specify in multiples of 100)? Like I said...the mechanics of placing the order correctly isn't intuitively obvious to me. How the options actually work, I think, are straight-forward.

Thanks,
1poorguy
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No. of Recommendations: 2
Hi 1poorguy,

And in both cases, do I specify shares or contracts (with the knowledge that if I do shares I have to specify in multiples of 100)? Like I said...the mechanics of placing the order correctly isn't intuitively obvious to me. How the options actually work, I think, are straight-forward.

NO and this is important.

One contract represents a 100 shares of stock. If you place 100 contracts you could be made to buy 10,000 shares of the underlying securites if the put is exercised.

There is a discussion on the Fool on the Hill board involving the whole world against me. I like the strategy, but there are those who do not. Xfatott made some good points about just selling the stock rather than selling the call, but this in my opinion this does not fit all sizes of situations and writing call and put strategies are profitable when well thought out and preferrable to just selling the stock. When trading stocks you have to well think out those trades too. In my opinion there is no difference.

But check out the Fool on the Hill discussion board
tom


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