Sonki,
You might get more details by finding some of my old posts--one particularly on the MSFT thread addressed to Sadim Glik.
In a nut shell, I usually buy LEAPS calls to support my long positions. Take INTC, for example, I would, at an intermediate low (such as when INTC was traded at 130-140) buy INTC LEAPS 99 or 00 of a certain strike price.
When I perceived that an intermediate high of INTC might be reached (such as a couple of weeks ago), I would start selling the LEAPS in increments until a trough is reached. By then I may be more or less depleted of the LEAPS and ready to initiate a new position. Since, by proper selection of beta, gamma and volatility of the underlying stock, the leverage factor of my chosen LEAPS is usually around 4, I could commit 1/4 of the funds (as the value of the stock) to LEAPS buy/sell and have my entire position safely hedged covered should there be a serious decline. (That is, of course, if I play all my cards right; the same timing requirements are needed if you use puts)
If, on the other hands, I commit more funds to LEAPS trading, then, each correction should yield extra profits for me assuming that the stock will eventually recover. They always did.
For this reason, I only buy LEAPS and commons in pairs, though not at the same time. I never owned LEAPS of issues which I didn't want to own. ASND was a borderline case, but I quickly disposed of it.
Good trading,
Ibexx |
