Voltaire: I have been thinking about another strategy which might reduce stress even more. Hypothetically, investor X owns 1000 shares of QCOM worth $135,000 (ie. $135 p/share), but they are very stressed out over the market. They could cover 1/2 the shares but still worry about the volatility of the other. They could also cover the whole 100% but are afraid to be left out of the potential appreciation. I was thinking what if they sold all 1000 shares and took the $135,000 cash. With that cash they turn around and buy 10 Jan 02 QCOM 110 Leaps for $55 per contract ($55,000 total)so they control the same amount of shares as before. They then have $80,000 in cash ($160,000 with margin) to buy a stock like QCOM, ELON, JDSU each month and write calls for living income. This seems like the ultimate low stress and income combination since the 02 leaps basically give you 2 years not to watch the stocks every uptick and downtick, and to share in the appreciation of the stock, while offering a vehicle (the $80,000 cash) to generate income each month to live on. Does this make any sense, am I missing anything. This just popped into my head while watching the Big East tourney tonight. Also, do the Leaps offer any buying power in the account. Thanks in advance, I am starting to learn, I think.
- Mike |
