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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: NateC who wrote (10235)	4/4/1999 6:29:00 PM
From: Mark Z	Read Replies (1) \| Respond to of 14162

Nate - Ask your broker because it will vary. Mine exercises both sets of leaps (35's and 50's) at the cost of two full stock trades, debiting my account with $1500 per contract less commissions. Alternatively you can: roll out the short call (the July 50's) roll in the long call (the Jan 35's) leg yourself out of both sides (some risk here; you have to believe the stock is going up short term) have your broker get you out via an unwind Example: assume underlying (MTC) goes to 52, Leap (Jan 35) now bid at 21, July 50 asking 3, July 35 asking 18. You could roll out the July 50 to an August 50 for more $$$ (probably around $150 per contract) or perhaps to August 55 (credit of around $75 per contract). The advantage to the latter is if the stock is trending upward, you get another 25+% ($2000 vs $1500 per contract less the $75 per contract it will cost you) come August. You could roll the Leap back to the July 35 for a net debit of $3. That way if the exercise happens, you recapture that $3 of time premium you'd otherwise lose. If, in the short term, you think MTC is trending upward, you could buy back the short side, wait for the upward drift in the underlying and then sell your long side. Or even do both simultaneously for a net debit of 13. While you are losing $2 that you'd get if you waited for your short call to be exercised (a) you get the money NOW to reinvest and (b) depending on commissions, # of contracts, etc. it might be worthwhile to sacrifice the $2 to gain commission savings. Finally, you could unwind the spread for whatever net debit you think you can get. You'd do this by placing that order with the broker who will then close out both sides simultaneously...market permitting. MTC is generally not a fast trading stock so there's not a whole lot of difference between the 3rd and 4th alternatives. But for fast moving stocks, the 4th alternative may be 'safer', albeit costlier in terms of commissions, than the 3rd. Internet stocks can move pretty quickly and before you have a confirm on the buy-to-close of the short option, the underlying could dip and you'd lose $$$ on the long leap.

To: NateC who wrote (10235)	4/5/1999 8:48:00 AM
From: Herm	Respond to of 14162

Nate! Take a look at Roth's book the chapter that talks about using the LEAPs as a surrogate for the stock. Again, what every book fails to provide is "when" to enter into the spread or CCs. It depends on what your objective. Is it defensive or offensive? In either case, the use of the BB and RSI charting indicators as pointed out on this forum (the WINs Approach) can greatly increase your timing for the trades. Everyone should download the free copy of the WINs PowerPoint presentation of Doug's web site at webbindustries.com. I will be updating the presentation to include more specifics on the LEAPs and option web sites references sometime this month.