How To Write Covered Calls - An Ongoing Real Case Study! Message Board

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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: Herm who wrote (10401)	4/17/1999 12:12:00 AM
From: NateC	Read Replies (2) of 14162

Herm...as always, you are teaching us, and challenging us. you wrote, you could buy with the same amount of money and control the value in LEAPs (CPQ CALL 15JAN01 @ 12) 9 contracts for the year 2001. That 900 shares of CPQ if you wanted to exercise later. UPSIDE GAP Your B.E. is $15 Strike + $12 LEAP cost = $27 before you have to act if CPQ gaps upward. Not hardly at this point! I'm trying to understand this better. If the 2001 LEAP 15Jan01 is at 12, when the stock is at 23......would there not be a rise in the LEAP price....when the stock goes to 27? I know it would be a low-delta rise...but the LEAP price will go up some, right?.....I'm having trouble understanding why the Breakeven would be $27.....you only have $12/share in the LEAP "investment".... So if CPQ goes up......your LEAP just goes up in value......I would think your BE would be whatever the stock price would be....at any point in time.......when the LEAP price is $12 again. sorry.....but if you could clarify a bit, it would be helpful

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