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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: Herm who wrote (11651)	10/9/1999 4:45:00 PM
From: Jon Tara	Read Replies (2) \| Respond to of 14162

Herm, I'd be interested in know how you would play CMGI, SUNW, and CSCO. As you know, I am primarly a short-term in-the-money call and put player. But now I have found a group of stocks that I am interested in CC'ing LEAPS on. I have made good money trading short-term options on these stocks, but I can see that a long-term position might be even more profitable. I am going to watch the market for the next couple of weeks before initiating a position, however, as I think things are quite unsettled. And I am worried about the year-end Y2K reaction by the public, so I am particularly interested in exit strategies. CMGI interests me particularly. It now has a P/E of 26 - unheard of for an Internet stock. Of course, this P/E came about as a result of the one-time sale of GeoCities, not as the result of sales. But this is precisely what the CMGI model is all about - sales are largely irrelevant for CMGI, and I expect a continuous stream of spin-off IPOs and stock swaps, as their strategy comes to fruition. $4/share realized from ONE of their properties, and they have dozens more. So, despite the 100X+ increase over the past two years (you could have bought CMGI for less than $1/share, split-adjusted, two years ago...) I think it's got a long way to go yet over the next 2-5 years. SUNW and CSCO, I feel, are ideally-positioned as the Internet continues to explode. the ole pick-axe theory... I will be watching the upcoming earnings figures, though, to confirm that my suspicion is correct that they are taking business from their rivals, rather than a general slump in the server and router businesses. I am interested in buying LEAPS on these stocks, and then 'CC' the LEAPS with shorter-term options. (My account is approved for spreads, so I will be able to do this.) Obviously, I will be more concerned about being called-away than I would be were I holding stock, because it won't be as simple as simply buying the stock back if I am called-away. I would think I may want to sell higher-strike calls than one normally would when holding the stock.

To: Herm who wrote (11651)	10/14/1999 7:33:00 PM
From: NateC	Read Replies (2) \| Respond to of 14162

LEAP Calendar Spreads (CCing LEAPs)in which you use the LEAP as a surrogate for the stock because it is much cheaper, will love this bit of news. A new change involves allowing investors to borrow up to 25% of the market value of a long-term options (more than nine month out to expiration) So, LEAPs could become even cheaper to purchase and setup as profitable CC workhorses. NOTE - Not all brokerages will buy into that. I ask that all of you keep your eyes open for news at your brokerages about that margin access for LEAPs. Currently, LEAPs are an all cash deal. The new rules would give you more slack and leverage for this powerful combination. Herm.....I've been working a bit with these long LEAPS, with the short CC's.....essentially a spread. Here's one that I've been working on (Charles Schwab) I went long 8 contracts of ZWSAH, the Schwab Jan 2001 call with Strike Price of 40...and initially paid $19 for that call....which at the time was in the money. So initial nut was $19 at that time (May 1999), I sold the Sept 65 (split adjusted) for 6.875 dropping the nut to $12.125 I bought it back for about $2 I then sold the August 47.5 for 7.375 and bought it back 6 weeks later for 25 cents I then sold the September 40 for 3.125......and after this my nut on the LEAPS calls was $3.94 That CC expired, and I sold the October 40 for 1 3/16....and I bought this back for 1/8 (These cheap buybacks....were obviously because SCH was tanking much of this time....53 in June, closed today at 29 and change) Yesterday I sold the November 32.5 for 1 11/16.....making my NET nut now $1.19 SO....the stock has gone WAY down while I've owned these LEAPS calls.....and yet my nut is $1.19 on these long LEAPS calls......which are today worth 5 1/2 (although this so far disregards commissions) Still....the "other dude's money" has knocked the nut down...than I can sit on these LEAPS if I want to until Jan 2001.......and if SCH takes off and recovers...which many think it will eventually do......the LEAPS could be worth a lot.......If it gets to 50, say sometime during calendar 2000.....the leaps could be worth $15 - $18 comments??