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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Herm who wrote (12808)5/26/2000 3:38:00 PM
From: NateC  Read Replies (2) of 14162
 
I could use a little help.

I do diagonal LEAPS spreads
I have one in place on LEH

I'm holding the Jan 2002 Long LEAPS call on LEH?..

And this morning I was short the June 85??which was 13/16 by 1 and I wanted to close that position out, rolling out and down, selling the new covered call JULY 75?.which was 6 by 6 3/8.

My brokerage is Dreyfus?and they have told me it is to my advantage to do this transaction as ONE transaction with a net credit instead of buying back the old call to close?..say at 15/16??and then selling the new one?..say at limit of 6 1/8.

If I were to do that,they tell me, I may gain 1/16 to 1/8 in the transaction?.because they can play with both ends of the transaction?.so should I ask them for a Net Debit of:

(using the above numbers) 6 1/8 minus 15/16 = 5 3/16

Or should I be more aggressive???..trying to go NEARer the bid on the buy back??..try for 13/16???.and try to go closer to the ask on the new short Cov Call position??..say 6 ¬?(just 1/8 under their 6 3/8 ask)?.for a Net Debit of
6 ¬ - 13/16 = 5 7/16

This ¬ point difference would be useful if I could get it.

Anyone have good experience with placing these rollout, rolldown, or rollup transactions this way (net credit or debit)??? I have previously always done them has 2 separate transactions.

What I'd like to know is do you push towards both Bid on the buyback side....and towards Ask on the new sell side?...and if so..how much

Thanks for help and advice
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