Selling Puts: Have Cash Will Travel Message Board

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Strategies & Market Trends : Selling Puts: Have Cash Will Travel

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To: OX who wrote (1155)	4/9/2000 10:06:00 PM
From: Tom K.	Read Replies (2) of 1235

...if you sell LEAPS and the stock tanks, you could get assigned prematurely.... OX, Since LEAPs have a great deal of time value, there's little chance of assignment. I use LEAPs as an adjunct to my basic PUT selling strategy. I'll sell an OTM LEAP on a quality issue and leave it on the back burner. As time passes, the time premium decays and when I need a filler to make my numbers, I'll cash it in. For example, I sold DELL Jan01 42.5 for 9 in Nov. If I did it right, I tied up $2125 in collateral for $900 income for each contract. It's now worth $5. If I cash it in, I'll get an annualized return of about 50% and it's available when I need it. Because I cheated and really didn't have the full 50% collateral set aside, my annualized return will be closer to 100%. Not suggesting that others do as I do, just pointing out that selling LEAPs can serve a purpose for some. Tom

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