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Strategies & Market Trends : Advanced Option Strategies

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To: B4TheBell who wrote (22)	7/7/1998 8:07:00 AM
From: Joe Waynick	of 355

>>McMillan discusses covered calls on LEAPS in Chapter 25 of his first book, "Options as a Strategic Investment".<< B4, I have to disagree. McMillan discusses using LEAPS as a covered write against stocks. You cannot write covered calls on LEAPS. After searching through Herman's thread, I discovered what he's actually talking about is buying LEAPS, and selling short-term calls at the same or lower strike price. Those are calendar spreads and combinations. He is hoping that the premiums generated by the short-term call is greater than the time decay and value fluctuation of the LEAPS. McMillan confirms this. McMillan also says this is a high risk investment. You are absolutely right about Recovery Spreads. That's one tool I'm going to have to study and thoroughly understand. It can save / enhance my profits on the tail end of a BPS / SW combination gone bad. With a BPS, SW, RS combination, it will be difficult to lose money on good stocks. I'm amazed at how much knowledge Herman has about options. Can you give a live example of how you used an RS to "get you out of a few pickles in recent months?" Joe

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