<<You buy SUNW for $40, sell the '00 45 LEAP for $10. If the stock is above 45 in 2 years, you make 50%. You don't lose until SUNW goes below 30.>>
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Well, in the Sunw example, you're actually making 37.5% over 2 years (15 points / 40) plus interest on the 10 you sold it for if you held the cash. There are better (more volatile-higher premium) stocks out there, if you like this strategy. Certainly not MO. Just for example QCOM (now @ 46 5/8), you can sell the Jan '00 60s for 10 5/8 (51.5% if called out), the 70s for 8 1/4 (67.5%), or the 80s for 6 3/8 (85.7% if called), of course there are many other things to consider, but they're out there. Also can sell some Leap Puts too so there is plenty of premium out there, and settin up a middle can be quite rewarding.
Dave |
