Herm,
I have been interested in doing the CC LEAP thing, but I keep coming across a major hurdle: GETTING CALLED OUT. This seems to be the major downside to this CC strategy, major movements in stock price, up and down can be devastating. I have no problem with the movements down, that is evident even in a normal stock ownership CC situation. My problem is that all that premie money you have put into someone else's pocket is gone if you get called out. There are times, especially in this market that a stock runs away on you, and you'd like to take your 10-15% for that month or 2, and move on. You cannot let this happen on a LEAP, or you'll lose. You HAVE to roll up, and out, and if the stocks starts moving too much, you won't be able to keep up.
I buy puts now and then, but usually avoid the long call. I prefer to run with the odds, and take my earned money off the table. with LEAPS, you may be forced to buy the long call and puts to protect a serious loss, or an inability to continue to CC your LEAP if the underlying drops under your leap strike. Sure, I have to shell out a bit more to by the stock, but why not just write naked puts and earn the premies while your cash earns interest?
Now I understand why you go out 3 months. A lot can happen in that time frame, and more premie money always means more options for your play. WHat do you do if the stock runs away, do you always take your premies and buy the long calls and puts? You obviously have to make that decision very soon after buying the leap. You talk about sleeping at night, how do you do it with leaps? I like to think that although getting called out can be a pain, it almost always means that you at least made some money on the deal. Let me know your thoughts...
Ryan
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