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Non-Tech : Trading IOMEGA based on technical analysis
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To: Teddy who wrote (1184)9/9/1997 10:31:00 PM
From: Jon Tara   of 1511
 
Nope, you need to have your account approved for options in order to buy LEAPS.

You may want to ask Dad to reconsider. But you'll probably have to pursue a pretty boring strategy. LEAPS can be used to REDUCE risk (as can any options). One way to do that is to buy a combination of LEAPS a T-bills instead of buying the stock. You buy options on the number of shares you would have bought if you were buying outright. Now your risk is limited to the option premium. For this to work in the conservative way it was meant to, of course, you have to invest the balance in T-bills, NOT use it to buy other stocks or options! :)

You may also want to consider writing covered calls. This is normally the first option approval an account will get (as if anybody actually follows the rules...). Your account should first be approved for covered call writing, then option purchase, then spreads, and finally naked writing. You should have some experience with stocks before being approved for covered call writing.

Writing covered calls is also a conservative investing approach, but can actually be a bit more fast-paced (and thus perhaps more palatable to someone your age) than buying LEAPS and T-bills. In order to extract the greatest amount of premium, you should be selling the near-term options (typically month after the expiring month), so you get to see a bit of "action" every couple of months.

This can be a good strategy if you are holding a stock for the long-term that is on a fairly steady upward course, and doesn't tend to flop around a lot. You can usually write option after option without having your stock called.
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