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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: NateC who wrote (10894)5/23/1999 2:56:00 PM
From: Jon Tara  Read Replies (1) of 14162
 
Question about CCs on LEAPS:

Sorry if this is too basic a quesetion. :)

If you own a LEAP, will most (all?) brokers consider a sale of a shorter-expiration call to be "covered"?

Or is it technically a spread transaction, and you are just using the term "covered" here for convenience?

Is this true ONLY with LEAPS, or would any sale of a shorter-expiration call against ownership of a longer-expiration call be considered covered?

But - wait - how would this ever be considered covered? Sure, you have the right to acquire to stock, because you hold the LEAP. But you would have to put up additional money to acquire the stock. So you are NOT truely covered. This HAS to be a spread transaction, which will have a margin requirement, plus will require an account approved for spread transaction. Right?
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