patrick.net

You need to have margin for this. Cause you could technically sell your stock after you open the position without closing the option thereby creating a naked option with unlimited risk, theoretically. Ask your broker what level of option trading you are approved for.

*doh* now I get it. Thanks!

I am only approved for the level right below margin because I specifically requested that. I've always viewed margin like playing with razor blades.

Another clarification here.

Usually when you have a stock you write (covered) *calls*. Meaning you sell the right for somebody else to buy your stock. There are different permission levels for buying calls vs selling covered calls vs selling uncovered (naked) calls.

If you are writing puts then the idea is that you are giving somebody else the right to sell the stock to you - so you don't need the stock itself but you need to have some money set aside, at least at lower permission levels. At higher levels you can do this naked too.

Thanks friend. It's painfully obvious to me now, that I don't know enough about trading options. I'll see what study material I can find, and go back to buying and selling calls in the meanwhile.

Go check this out - gives a complete intro on how to Open to Sell option contracts. Note: you can do this on margin - but not suggested since the trading company could call for the funds at any time. Rather, it's best to only sell options when it's a company you don't mind owning if the option ends up being called.

http://www.palmbeachletter.com/

It's painfully obvious to me now, that I don't know enough about trading options.
Please don't let that stop you. I had (and still have) a large position in a single stock that I can't part with. It was starting to reach nosebleed levels last year (a point at which I would have been okay with it being sold) so I wrote some covered calls against the underlying position and managed to partially 'finance' a new roof. The stock, of course, nosedived during the Republican mini-recession of Summer 2011. At least I have a new roof.