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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: Dominick who wrote (3271)	1/17/2002 12:32:12 PM
From: Uncle Frank	Read Replies (2) of 5205

>> I think the delta for Dale's leap is around .80. Meaning for every point QCOM drops the leap should fall only 80 cents. But since the LEAPS cost a fraction of the price of the stock, an 80 cent drop is a much larger percentage loss. In the case of a $46 stock and a DITM LEAPS that costs 22, A stock drop of 1.00 represents a 1/46=2.2% loss. A LEAPS drop of .80 represents a .8/22=3.6% loss. I note as well that the chances of a good company, such as one of our Gorilla and Kings, dropping to zero are very small, while the chances of a LEAPS expiring worthless are quite real, as I know from personal experience :-(. Though it is one of the more conservative options plays, I view the risk level associated with calendar spreads as significantly higher than covered calls. jmho, duf

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