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Strategies & Market Trends : Advanced Option Strategies -- Ignore unavailable to you. Want to Upgrade?

To: B4TheBell who wrote (22)	7/7/1998 8:07:00 AM
From: Joe Waynick	Respond to of 355

>>McMillan discusses covered calls on LEAPS in Chapter 25 of his first book, "Options as a Strategic Investment".<< B4, I have to disagree. McMillan discusses using LEAPS as a covered write against stocks. You cannot write covered calls on LEAPS. After searching through Herman's thread, I discovered what he's actually talking about is buying LEAPS, and selling short-term calls at the same or lower strike price. Those are calendar spreads and combinations. He is hoping that the premiums generated by the short-term call is greater than the time decay and value fluctuation of the LEAPS. McMillan confirms this. McMillan also says this is a high risk investment. You are absolutely right about Recovery Spreads. That's one tool I'm going to have to study and thoroughly understand. It can save / enhance my profits on the tail end of a BPS / SW combination gone bad. With a BPS, SW, RS combination, it will be difficult to lose money on good stocks. I'm amazed at how much knowledge Herman has about options. Can you give a live example of how you used an RS to "get you out of a few pickles in recent months?" Joe

To: B4TheBell who wrote (22)	7/9/1998 8:57:00 AM
From: Herm	Read Replies (2) \| Respond to of 355

Hi B4, I wish I can take credit for the recovery spread. It is a very nice approach. I learned about that technique after attending a free workshop offered by the CBOE Educational Seminars that travel around the country. The term "recovery spread" is exactly what they called it in their booklet. I highly recommend attending those workshops which are offered to the public for free. They have information for novice and experience investors. They are hot! They offen have actual floor traders sharing their expertise. As far as, CCing with LEAPs. That concept was mentioned a long time ago by Steve. He brought it to my attention and I looked at it up in McMillan's book. Wishing you all the best of good buys!