Sounds Familiar.
I'm not suggesting you do this, but I had the same situation with MSFT. I'd been writing covered calls on it, doing fine, then it split & jumped.
I ended up buying back my April calls, selling a January 1999 leap,
and buying a leap $20.00 higher in strike price.
As Woody Hayes said about passing the football: "There are only 3
things that can happen, and two of them are bad." That is about
my situation.
However, my own twisted rationale for this was:
1) I have until the end of the year for MSFT & the Justice Dept.
to have a real rhubarb and MSFT to go in the toilet long enough for
me to buy back the leaps I sold.
2) Like yourself, I figure IF the stock goes up, it will go up a LOT.
In that case, I can exercise the leap I bought to deliver the stock
that will get called away from me, and I will still own the stock.
I'm not saying this is gonna work....but I do know that I was getting
real sick of having my money tied up while somebody else was reaping all the gains on the stock. At least this way I have more time for something to happen, and I received enough extra for the leap to
buy the higher priced leap. I consider that my "coverage" in case the stock repeats last year's performance.
$20.00 is a HUGE hole to cover. Anywhere in the middle & I get creamed
on both sides.
But, when I figured the taxes due on the stock if it was called away
in April, I decided to put it off a while and see if we don't either
have another MAJOR correction, or MSFT goes to the moon. Either of those & I'm ok.
Not a good solution, I admit. But sometimes when you fall into the
outhouse, you come out smelling like an outhouse. <bg>
Doug |
