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

To: rydad who wrote (3269)	1/17/2002 11:30:12 AM
From: rydad	Respond to of 5205

Regarding the article I posted on writing calls on Leaps........http://www.optionetics.com/articles/article_full.asp?idNo=1669 " if the stock rises sharply, your LEAPS could be called away to purchase the shares needed to cover the calls...." Now if the stock drops, since the LEAPs are just long term options, am I correct that the value of the LEAP drops also? When the LEAP expires and the stock price is less than the strike price of the LEAP, is the price of the LEAP =$0? Would I then have lost my initial investment? Is that the risk that is involved here? If the stock goes down enough at expiration, then I will lose the amount paid to buy the LEAP? So I need to have a certain amount of confidence that the stock will rise enough to meet the LEAP strike price, right? If the Call written against the LEAP is called out, then is the LEAP sold and closed out? I seem to be missing something... could someone please explain further. Thank you,