Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: NateC who wrote (11671)	10/21/1999 9:45:00 AM
From: Herm	Respond to of 14162

Interesting question Nate. It does reinforce the reason why CCing against LEAPs as spreads means you should never write a CC at a strike price lower than LEAP cost + LEAP strike. LEAP SPREADS So, if the LEAP cost $11 + LEAP strike $40 = $51 you need at least a CC strike of $55.00 to really cover your nut under the worst conditions which should not happen to user of WINs anyway. Although, if you are expecting a retreat on the price of the stock you could CC at strike $50 (ITM) in order to capture the most decay from the pullback and let your CCer eat it. Just like you did Nate with your LEAP! :-) Here is the math on the example you gave without factoring in how many rounds of CCs you collected premies: LEAP CCs Stock Price Outcome $40 long $35 short (-$5) $37 exercised +$2 for CCer -$3 for you $35 long $40 short (+$5) $37 exercised -$3 for CCer +$2 for you