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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: NateC who wrote (12021)12/6/1999 1:38:00 PM
From: David Lind  Read Replies (2) of 14162
 
Nate, I am an experienced position trader, but new to covered calls with leaps. You brought up a subject with Vicki that is somewhat confusing to me, and that is the effect of time and price movement on the long leap. I am wondering, for example, how far the current price can swing either way before it begins to strongly impact the leap strike price, one or two years out. Further, how long can one continue to write calls against the leap, before the value of the leap changes. And in what direction is it likely to change, assuming stock price stays in the same range?

These questions obviously go to the issue of when a trader should start to be concerned about the value of the leap when using it for writing calls, and when it may be time to jump out of the leap if one doesn't want to hold it to expiration. For me, it is the only source of confusion left in what appears to be a very good strategy.

Any thoughts? Anyone want to contribute?

- David
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