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kkirby, I dunno about your broker, but mine won't let me sell covered calls on a margined position. If you're on margin, you're calls aren't "covered", are they? I think that'd be true anywhere, BWDIK. Assuming such, you'd need to put up a full 100K to buy your 1000 shares, though you could then remove 50K for sold calls. So back at square one. Also, in your scenario, w/only 10K of capital left over, you'd be in margin call territory, and RMBS, given its volatility, does not seem like a good stock to be deeply margined in (is there any?). OTOH, let's say you buy 200 shares for 20K, and sell 2 calls for 10K. Then you use that 10K to buy a "free" hundred shares. 2 1/4 years from now, you collect 20K assuming you're called out, plus you're home free on the bonus shares. So you have 20K plus 100x the current trading price in Jan 2002. Need to get the pencil out to figure risk line... A quick pencil scratch says this approach will lower breakeven from 100 per share (buyin price for common) to 66.66 per share in 2002. Straight common would only provide better gain at 275-300 per share or higher in 2002. Greg |
