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Pastimes : Play It On Paper- Clappy's Newbie Option Thread -- Ignore unavailable to you. Want to Upgrade?

To: hlsjones who wrote (38)	7/23/2000 12:32:35 PM
From: Clappy	Read Replies (2) \| Respond to of 176

Harry, That is an excellent strategy. I read it a few times to make sure I understood correctly. I looked up several Leaps and many of them have costs of less than 25 cents per month. With my very short term bearish stance/ long term bullish stance, it appears that now is a good time to execute this type of a maneuver. If I could ask you a few newbie questions first, just so I can be sure that I understand this idea. 1. I would buy the leap as many months out as possible. Jan 03 over Jan02 if possible. As far in the money as possible? Or just look for any ITM leap that is under the .25/month cost, thus keeping more leverage? 2. I'm then using these leaps as "collateral" to sell calls. In other words, it's as if I'm shorting calls. Correct? 3. I would choose to sell calls that are slightly out of the money. This would yield me a nice percentage if my prediction was wrong and got called. Correct? If the leaps get taken away, chances are that the increase in price would have also increased the value of my leaps, so I make money on that end. (Hopefully enough to offset the loss incurred by the shorted calls...) This method has certainly opened my eyes. It appears to remove a lot of risk. In addition, it looks to be a good way to buy long and trade short at the same time. Thanks for posting this. I look forward to reading more of your ideas. -Clappy