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

To: Mathemagician who wrote (1514)	7/16/2001 3:54:46 PM
From: Uncle Frank	Read Replies (1) \| Respond to of 5205

Out of curiosity, are you employing this in your portfolio or discussing a theoretical approach. duf

To: Mathemagician who wrote (1514)	7/16/2001 3:59:56 PM
From: Dr. Id	Read Replies (1) \| Respond to of 5205

Aside: Some of you may be wondering why I've chosen to cite examples of longer term options when in the past I've advocated front-months. There are several reasons. One is that the larger dollar amount provides greater downside cushion. Another is that on the more volatile or lower priced stocks not only are you less likely to be killed by a brief spike (up or down), but you are in a better position to take advantage of them by trading the option (especially with puts, where you are not as married to the underlying). To me, it makes less sense to adopt a LTBH attitude with options than with stocks. All option premium gains are short-term regardless of the holding period. Excellent points, mathman. The longer term option strikes can be just as profitably traded short term, but with less stress at having to hope for short term movements. I'm planning to look out further ahead and see if I can take advantage of the volatility without as much tension to be "right" in the short term. Dr.Id@Illtryanything.pov

To: Mathemagician who wrote (1514)	7/17/2001 10:31:31 AM
From: BDR	Respond to of 5205

<<To me, it makes less sense to adopt a LTBH attitude with options than with stocks. All option premium gains are short-term regardless of the holding period.>> True in most but not all cases. All gains from options are short term because options by definition expire in less than a year. And profits from shorting LEAPS are treated as short term gains because profits from shorting are always treated as short term gains regardless of the holding period. But some profits from long LEAPS may be long term gains. The extended expirations for LEAPS mean that long LEAPS positions can be held long enough to qualify for long term gain treatment. As Roth pointed out in his book, buying a LEAPS put on a stock that you think is going to decline and holding it for more than a year is the only way to essentially short a stock and have your profits treated as long term gains. cboe.com Long Puts If a put option is acquired and sold prior to exercise, any gain or loss is short-term or long-term capital gain or loss, depending on the holding period of the put. The expiration of a long put results either in a short-term capital loss if the put is held one year or less or in a long-term capital loss (20% or 28% maximum tax rate, as the case may be) if held for more than one year. If the put is exercised, the cost of the put and the commission on the sale of the stock reduce the amount realized upon the sale of the underlying stock delivered to satisfy the exercise. Of course, your post dealt with naked short LEAPS put positions and so the profits would be taxed as short term gains, but I wanted to point out that long term treatment is possible. Caveat - don't get your tax advice off of threads on the internet. Talk to a CPA or tax attorney.

To: Mathemagician who wrote (1514)	8/29/2001 4:29:28 PM
From: StockHawk	Read Replies (1) \| Respond to of 5205

for a relatively conservative play, write a SEBL Jan-02 30 put for 4.2. Your effective purchase price is 25.8 if assigned so you are protected against a 37% decline in the underlying. If SEBL stays above 30, your period ROI is about 16% Hi Math Man, You have presented several very thought provoking possibilities on this thread, and I have often copied them down for later study. Today I was reviewing this one, which looked pretty good at the time. Of course, a lot can happen between now and Jan. but right now the drop in SEBL would have completely wiped out the premium, and paying $30 for a $22 stock would hurt. Plus SEBL could keep falling. It might be interesting to follow this play with the strategy you outlined in post 1881, the "Money Generator." That strategy begins by selling a naked put, as was suggested with SEBL. If the stock is put to you, the next step is then to sell a straddle/combination. Have you been watching any of the plans you have outlined, and if so, how are they playing out? StockHawk