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To: BGR who wrote (113531)	3/31/1999 5:26:00 PM
From: Marq Spencer	Read Replies (1) \| Respond to of 176387

BGR, Thanks for your response. Let me address some of the points you raise: 1. Legging into a spread position is essentially equivalent to market timing with options. I have been burnt (once rather severly) trying to do this so many times that these days if I believe that the spread will be profitable by expiration, I set it up outright, considering the 1.125 as an expense. I agree that legging into a position is the same as market timing with options. Doing it with 2001 leaps gives one time to work with. This is a bullish strategy, so one has to expect the underlying to appreciate. That's why I like the zero-out-of-pocket spread setup. Additionally, it also takes care of your 3rd point below. 2. Don't ignore the time value of money in your calculations. You have to discount the $5 ultimate gain as well, though it will probably be more than offset by the difference in LT and ST taxes. Yes, the difference is $1.125 now (minus comm.) versus $5 (minus comm.) later. I believe that to limit your risk, you can only do these under certain conditions, which arise no more than a couple of time a quarter, and only with a stock that you know really well. 3. More importantly, don't ignore risk. What if the equity ends below 45 at expiration? Absolutely. Every investment decision is risky and should only be taken after a thorough analysis of risk and one's ability to withstand it. This is, as I said, a bullish strategy. And one can close the position whenever one feels uncomfortable with it, between now and expiration. Unless the equity has tanked, the spread will still be worth something. - Marq.