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Strategies & Market Trends : The Covered Calls for Dummies Thread -- Ignore unavailable to you. Want to Upgrade?

To: BDR who wrote (310)	4/29/2001 12:13:13 PM
From: Uncle Frank	Read Replies (1) \| Respond to of 5205

>> A calendar spread (simultaneous sale of a shorter term option and purchase of a longer term option) takes advantage of the different rates of decay of the time premium to yield a profit. My impression is that calendar spreads are simply leveraged versions of covered calls in which LEAPS are used as a low cost substitute for stock. Since that leverage comes at the price of substantially increased risk, I've avoided them like the plague. duf

To: BDR who wrote (310)	4/29/2001 5:24:59 PM
From: jghutchison	Read Replies (1) \| Respond to of 5205

Dale, What I meant to say was option time premium decay accelerates toward expiry. I believe I addressed the issue of buying vs selling option premium. Buyers normally lose the bet. However, there are times when it pays off handsomely to risk some capital on long leaps. But you have to time the market and buy at the bottom....like April 4. Ciena January '01 40 calls were offered for less than $10 on that date, and rose up to $36 on April 20. Events like this occur about once a year. So market timing skills are essential. Jack Hutchison