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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: Greg Higgins who wrote (6292)1/5/1998 2:09:00 PM
From: R. Gordon  Read Replies (1) of 14162
 
Hi Greg,

Thanks for the reply.

>>>The one problem with LEAPS are that they are not marginable. You could exercise them, or you could sell them to get money to buy the stock you owe.<<<

If I read this correctly, I don't have to buy the stock outright, but I need to provide the difference between their option strike price and the profit they would earn from their call. By selling the leap, I would have the money necessary to cover the difference and keep some profit for myself.

>>>If you have sufficient margin, you can short the stock. You may be able to go short against the box using the LEAPS as the box for your short stock. This might be allowed with little or no aditional margin. Then when (or if) the stock returns to more reasonable levels, you buy to cover, and then look for opportunities to write calls against the LEAPS again. <<<

An interesting idea about shorting the stock against the box. I'll give it some thought.

Thanks again,

Richard
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