51 lines
1.0 KiB
Plaintext
51 lines
1.0 KiB
Plaintext
134
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TABLE 5-1.
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Position at July expiration.
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XYZ Price at Call Price at
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Expiration Expiration
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30 0
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40 0
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50 0
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55 5
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60 10
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70 20
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80 30
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FIGURE 5-1.
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Uncovered (naked) call write.
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+$500
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C
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0
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~ ·15..
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X
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w
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cu
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(/J
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~ ...I
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0
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lt,
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.... ......
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", Naked Write
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45 SO',
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.... .. .... .. .. Short Sale ,,
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.. ..
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Stock Price at Expiration
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..
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Part II: Call Option Strategies
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Profit on
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Naked Write
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+$ 500
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+ 500
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+ 500
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0
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500
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- 1,500
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- 2,500
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.. .... ..
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~
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Moreover, the short seller pays out the dividends on the underlying stock, whereas
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the naked call writer does not. The naked call will expire, of course, but the short sale
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does not. This is a situation in which the naked write outperforms the short sale.
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However, ifXYZ were to fall sharply- to 20, say- the naked writer could only make
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5 points while the short seller would make 30 points. The dashed line in Figure 5-1
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shows how the short sale of XYZ at 50 would compare with the naked write of the
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July 50 call. Notice that the two strategies are equal at 45 at expiration; they both |