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Strategies & Market Trends : The Covered Calls for Dummies Thread

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To: alanrs who wrote (4682)	12/21/2006 5:25:33 PM
From: TimF	of 5205

When the underlying loses a lot right after you buy leaps and sell short term calls then your position will be underwater, but the same would be true if you did a buy/write with shares. If your trying to get a certain premium from the short term calls, then you might have lost less if you did a buy/write against LEAPS. But likely you could have sold the shares for something, so at least you wouldn't have had them annoy you for two years. If on the other hand you where entering a position not based on the size of the premium from the short but based on how big of position you could get with X amount of money, then you lost more than you would have with a conventional buy/write. I would have paid someone to take them off my hands, but there is no mechanism for entering a -$.05 ask. If it ever happens again I'll buy all the LEAPS you care to sell for -$.05. <g> Once in a fit of irrational bullishness, I sold LEAPS against shares I had and used the premiums to buy a larger number of medium term calls because I thought that the stock would appreciate a lot in the next few months, but not continue at that rate. It didn't work out so well.

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