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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (88705)1/21/2001 7:19:59 AM
From: Richard Gibbons  Read Replies (1) | Respond to of 132070
 
Hi Michael,

I've been thinking about the bear credit spreads using leaps, and the most of the time the risk/reward looks strange.

Take MU for instance. The stock's at 47 7/16. The 2003 45 Call is 20 - 20.75, while the 2003 65 Call is 14.5-15.25. So say you sell at 5.5. Doesn't this leave a lot of downside? You potentially get the 2 years of interest, but even then it looks like you're betting 20 for a possible win of about 6.

What am I missing? Is it just that you're so confident of your analysis that the stock will die that you'd make this sort of bet? Or is that, if the stock dies, you'll close out with most of the profit early, whereas if the stock goes up, you can close out (or roll) when the stock hits the strike price of your long call, and not end up losing much. Or something else?

Thanks,

Richard



To: Knighty Tin who wrote (88705)1/26/2001 9:48:30 AM
From: Dan  Read Replies (2) | Respond to of 132070
 
Hi Mike -I've been away. I see you wrote about Maximum Income part 3.
I can't find part 1&2. Could you supply link or number.
Or is it like "History of the World - part 2", where in this case you just started with 3?

I've been saving (printing) your "words of wisdom" for years. For the next 5 months, I want to maximize income.
Your help is always appreciated.


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