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Thanks, Stan. For grins, I've looked into RMBS LEAPS. The premiums are outrageous. You might as well buy on margin. Right now, for example, a Jan 2002 RMBS Call striking at 100 (slightly in the money) costs 50 1/8 (!), or almost 49 percent of the stock price! As a comparison, a Jan 2002 QCOM Call striking at 180 (again, slightly in the money), costs 69 1/8, or about 37.5% of the current share price. One way to play RMBS (if you were content with a max 50% return over a 2-year period) would be to buy 100-share blocks and sell covered calls against them to get half your money back. You'd be protected all the way down to 50! If the stock then takes off in the interim, you will get called out (with a 50% profit!), but in the meantime, you could buy more shares on the way up (and sell more calls against them!) for another ridiculous 50% premium. I sure like LEAPS on the Q and have found them very profitable, but RMBS LEAPS look stacked toward the house (i.e., the call writer). |
