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Politics : Formerly About Applied Materials
AMAT 327.03+2.5%3:59 PM EST
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To: Tito L. Nisperos Jr. who wrote (11351)11/18/1997 9:36:00 PM
From: BLong  Read Replies (1) of 70976
 
I have never tried leaps, but am very interested in the strategy. I assume you are talking about "leap calls" as a long term alternative to buying stock now, and "leap puts" as an insurance policy for stock already purchased. In the case of AMAT, at it's current low, wouldn't most long term investers be more interested in leap calls? Could you give us some examples of the premium asked for AMAT leap calls that are available, and your opinion of which is the best deal? My understanding is that 3 year leaps are quite expensive (about 1/3 the stock price).

I also understand that individuals can write leaps. A friend of mine told me that he has made money writing leap calls on INTC with the strike price slightly out-of-the-money. The strike price is higher that what he originally paid for the stock, so he doesn't lose money if the option is executed (he gets the strike price plus premium),but most of the time the option is not executed before the cut-off period (in which case he collects premium plus gets to keep the stock). Of course he pays a commission to a broker for the service, but it doesn't sound too bad, except that it keeps your stock tied up for a long time.
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