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+420 Part IV: Additional Considerations 
+ever, to assume that the risk in holding a call option is less than 100% in a holding 
+period as short as 30 days. The strategist may feel that he is disciplined enough to sell 
+out when losses occur and thereby hold the risk to less than 100%. Alternatively, 
+mathematical analysis will generally show that the expected loss in a fixed time peri­
+od is less than 100%. One can also mitigate the probability oflosing all of his money 
+in an option purchase by buying in-the-money options. While they are more expen­
+sive, of course, they do have a larger probability of having some residual worth even 
+if the underlying stock doesn't rise to the trader's expectations. Adhering to any of 
+these criteria can lead one to become too aggressive and therefore be too heavily 
+committed to option purchases. It is far safer to stick to the simpler, more restrictive 
+assumption that one is risking all his money, even over a fairly short holding period, 
+when he buys an option. 
+AVOIDING EXCESSIVE RISK 
+One final word of caution must be inserted. The investor should not attempt to 
+become 'Janey" with the income-bearing portion of his assets. T-bills may appear to 
+be too "tame" to some investors, and they consider using GNMA's (Government 
+National Mortgage Association certificates), corporate bonds, convertible bonds, or 
+municipal bonds for the fixed-income portion. Although the latter securities may 
+yield a slightly higher return than do T-bills, they may also prove to be less liquid and 
+they quite clearly involve more risk than a short-term T-bill does. Moreover, some 
+investors might even consider placing the balance of their funds in other places, such 
+as high-yield stock or covered call writing. While high-yield stock purchases and cov­
+ered call writing are conservative investments, as most investments go, they would 
+have to be considered very speculative in comparison to the purchase of a 90-day T­
+hill. In this strategy, the profit potential is represented by the option purchases. The 
+yield on short-term T-bills will quite adequately offset the risks. One should take 
+great care not to attempt to generate much higher yields on the fixed-income portion 
+of his investment, for he may find that he has assumed risk with the portion of his 
+money that was not intended to have any risk at all. 
+A fair amount of rigorous mathematical work has been done on the evaluation 
+of this strategy. The theoretical papers are quite favorable. Scholars have generally 
+considered only the purchase of call options as the risk portion of the strategy. 
+Obviously, the strategist is quite free to purchase put options without harming the 
+overall intent of the strategy. When only call options are purchased, both static and 
+down markets harm the performance. If some puts are included in the option pur­
+chases, only static markets could produce the worst results.