Dick Hickman....you are fantastic!!! (at least your index is)..nice work. And lots of it.
I've been working (not on paper, real $$'s) on something you and i have posted about. I've been doing a few LEAPS spreads......buying a long LEAPS call...and then trying to knock the nut down gradually by selling Calls against it.
You helped me get into this, and also advised me about the Harrison book...so I thank you for this also.
the idea is....if a stock is at, say $50...and you buy the 40 strike Jan 2001 call....you might pay.....$10 for it.
over the next year....if you do it well (and you can't get called out...you have to repair every month you might get called out)
But after you've sold one $2 call, expired..and then a $1 call, expired, and then another call..$2, expired....your nut on this LEAP is down to $5. So you have knocked the nut down to $5....while the stock has either gone sidewise..or advanced. If you keep it up, knock the nut down to $0, you can then stock CCing....because you have a free ticket to purchase stock, or to sell your calls.....and your profit is whatever the price of your long LEAP is....hopefully by then $20 or $30......OR, if you wait till expiry....your profit is the difference on expiration (or the day you exercise your long calls)......between your strike price of $40, and the stock's price..hopefully by Jan 2001.....70 or 80 or more.
Maybe a little boring for some of you lurking turks....but a nice way to go.
BTW...if you do this on a Dell, or a Cisco, or something else that's on fire......it won't work too well...because you'll end up buying back all of your CC's, and what you want to have happen is for most of them to expire.....thereby reducing your nut.
I'll post some real numbers on one of them one day soon. |
