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Technology Stocks : Intel: Short Term Stock and Option Trading/Strategies
INTC 37.04-6.2%3:59 PM EST
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To: jmac who wrote (126)3/20/1997 10:40:00 PM
From: Nancy   of 220
 
Your calc lost me -

You buy 120 and sell 140, the debit cost is around 10.5 when intc was at 132 couple days ago. your downside is limit to 10.5, your upside is limited to 20-10.5=9.5, if intc close at 140 or above by exp. since you already sold 140 (unless in between you have a chance to close it w/small cost - then the cost would add to your initial 10.5 - your upside is limited to the diff of 2 strikes minus the debit cost)

the diff between owning stock and owning spread is, for the same amt of money, spread gives you much bigger % return if intc doesn't run above 140 much more or you could close your 140c sometime between now and exp at very favorable costs - instead of selling leap, you could keep selling at or out of money calls every month - it works the same, except it doesn't initial limit your downside.

Say, you do 20 contracts on spread, your investment is 20,000 which would almost double in 8 months if everything works fine. But for 20,000 owning shares, I dont see how you can double in the same period - INTC has to go to 250+ for same kind of return if you own shares.

The strategy should work for almost any stock that has potential to go up in the next LEAP cycle. (CSCO, COMS)

99 LEAP may be better than 98 LEAP, the extra prem doesn't matter in this case.
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