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

To: waverider who wrote (736)	5/22/2001 10:57:07 AM
From: BDR	Read Replies (1) \| Respond to of 5205

A .40 increase in premium when the stock rises 6.25 isn't much, but remember that the LEAPS expiration is 20 months away and the strike price is still 29 points OTM. You won't see a lot of variation until the stock price approaches the strike price and/or the expiration date approaches. One can use this characteristic of LEAPS in various ways. If you bought an in the money LEAPS and sold an out of the money LEAPS with a higher strike price (creating a spread) your ITM LEAPS would rise in value faster than the OTM as the stock rises creating a profit for the combination of positions with reduced risk. Or, looking at it another way, if you bought an OTM LEAP and the stock fell you would not suffer losses to the same degree as the equity holder. This is a reflection of the terms of the LEAP and not necessarily a result of reduced volatility of the market. But don't listen to what a dummy says. Read what the experts say before investing.