<bought some $30 call LEAPs for the year 2000 yesterday. Paid $5 1/4 and now they're over 6. Why mess with options when the LEAPs offer some breathing room?>
Andrew; Good question, but let me apologize for not making my earlier post clear. When I said I was bailing out of the April 25 calls, what I didn't make clear is I had sold them (short position) and needed to buy them back before I saw a loss. That said, let me answer your question. First, I'm not an expert on LEAPS because I write puts and
calls for monthly income purposes. The reason I don't like LEAPS is
1. The rate of return on monthly option writing is considerably higher than a long term position which represents a leap.
2. The liquidity of LEAPs is considerably less than near term puts and calls. As a result, the distance between the bid and ask price is higher which raises my cost.
3. More importantly, I enjoy the market, watch it daily and participate frequently. Just my style of investing.
LEAPS, if selling (I don't believe in buying puts and calls) are a very conservative play. As you properly point out, you have lots of wiggle room in case something goes wrong. However the stock offers that same advantage. Hopefully someone with more experience than I can further contribute to your question. Good Luck,
Mike |
