Deepak Shenoy

Which IT Outsourcing Company Gives Maximum Return on Covered Calls?

Perhaps you misunderstood - i talk about WRITING naked puts, not buying them.

Writing a Naked Put is exactly the same on the risk/return graph as a covered call, if you intend to square off at expiry. It's just that a covered call involves more commissions to the brokers, which is why it has always been promoted. If you plot the pay off diagram a naked put it's exactly the same as a covered call (premium as profit if the stock goes up, strike price minus premium is your break even.

When you write covered calls or naked puts, you should write them on stocks that you do not expect to move much. There are perhaps better stocks than Infy (and indeed the Indian IT pack) to use this strategy.

For the same $20,000 use $15,000 as margin and write a naked put instead. As I said, the payoff is exactly the same as a covered call, and you pay lower commissions. Even if you use the same amount at risk, writing a put is less time consuming since you need to track only one thing (the market price of the put).