Bruce, In fact, I almost always leg in to spread conversions and reverse spread conversions. And bull and bear spreads and butterflies. I'm just a leggy guy. <G>
However, there are many situations where the right now price would not give you a negative return. These are almost always in high priced stocks, absolutely. A $90 stock is likely to have a Leap that overcomes the $5 spread to the lower put strike price plus the put premium.
For an example, you only have to look at the Dell I unwound. You could buy the stock at $64, sell the call on the bid for $29 and buy the put at $13. BAsically, you have risk of $14 on the stock (from $64 to $50) and $13 on the put, for $27, which is less than the $29 call premium. I wouldn't do this one here (duh, or I wouldn't have unwound it <G>) as the upside isn't that great, but you can sure do it without risk of loss.
MB |
