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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: James F. Hopkins who wrote (12830)	5/28/2000 7:29:00 PM
From: Dan Duchardt	Read Replies (1) \| Respond to of 14162

Jim, as it was the momentum and demand was such that after I bought the 2002 20s for 13-3/4 the 25s were bidding that in about 2 hrs so I said what the heck..might just as well take it..and I sold the 25s for exactly the same 13-3/4..not a big deal but I have a $5 spread for the cost of commisions That's a great play, IMHO. I've been trying to do exactly the same thing legging into nearer term spreads. It's more difficult to get a "free" spread in the near term because of the lower delta on the OTMs and the bigger price differential on the ITMs, but I managed to do it once or twice. Unfortunately, I got my fingers burned trying to better the situation. I like the idea of using the LEAPS, since the no-risk position is easier to achieve. One must wait for payday with the LEAPS, but over time I can see great potential in accumulating a LOT of these. Odds are a number of them will pay off, and the ones that do not can't hurt you if you manage to get in with no debit as you did. Compare what you got to what you set out to do. Had you gotten into your 20-40 spread, you would have done so with a debit of around $3.50 to $4, even with a successful leg in. Had you done the 20-25 spread with 4x the number of contracts you would be in with a debit of commissions only, with an equal maximum potential gain, a $15 lower stock price target for realizing that full potential, and virtually zero downside. A much more favorable position, eh? Dan