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Strategies & Market Trends : The Covered Calls for Dummies Thread
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From: IHateSourCream4/18/2007 6:48:46 PM
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I have a question for the thread. I want to learn about buying an in the money call and then selling a shorter term out of the money (or at the money) call against it. Does anyone know what this strategy is called? And if the calls are assigned, what would the procedure be for delivering the shares? Would the longer term in the money calls have to be exercised prematurely? Or would one buy shares in the open market? Anyone have information and/or comments about this type of strategy?

I tried to Google it, and at first, it seemed as though it might be called a calendar spread. But according to MacMillan's book, calendar spreads would involve the same strike price. In the scenario I'm describing, the in the money longer term call would have a lower strike than the shorter term call being sold.

As an aside, I had bought Macmillan's book a while back, but admittedly I never spent time with it. It's been serving as a big paper weight. ;-) Before posting this question, I did pull out the book to see what I could find. It's the oddest thing. My copy starts with pages 203-234 and then goes to page 11 and onward. I have no table of contents, no pages 1-10, and no forward! <g> I tried checking the index, but since I have no idea what the name of the strategy is that I'm describing, the index wasn't much help. :-)

I thought some of the knowledgeable folks on this thread might have information and perhaps some experience with this strategy?
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