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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Wyätt Gwyön who wrote (5622)8/30/1999 5:41:00 PM
From: edamo  Read Replies (1) of 54805
 
g.moore re: "rmbs leaps stacked toward the house"

of course, not just rmbs, but any call purchased affords the writer a "win"...can never lose selling covered calls.

you feel a rmbs 02100 is pricey...it is, because you are not looking at it as a stock replacement, more of a speculation. 02100@50...in the money at 150(100+50)...why not pay a higher prem for a 0250?? 0250@69...in the money at 119(50+69)...if you believe in the underlying, then it will begin to move par with the common...never use margin...buy at .70 to the dollar. to lessen your cash output and if you believe rmbs at or above 110 by 2002, sell 02110 put for a 43 prem...combination call buy and put sale very bullish...net out of pocket 26 (69-43)....rmbs up call up, put down, no cap on earnings, no worry about losing stock...if put your cost would be reduced by the prem....but you should only use options as an investment enhancement if you firmly believe in upward bias....good luck..ed a.

p.s....strategy applies to any issue..prudent to buy ditm calls as stock replacement...less risk, more intrinsic value...should you catch a good one and the stock runs and splits, possible to sell one contract and use proceeds to exercise/buy common=just about free stock...
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