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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: Herm who wrote (10401)	4/16/1999 12:09:00 PM
From: Greg Higgins	Read Replies (2) \| Respond to of 14162

This is an excellent example of a low risk, low maintenance, long term approach to investing in a stock you like using LEAPS. (Excepting the math which Herm fixes in a later post.) However, if income is your goal, and you are willing to accept more risk and involve yourself in more maintenance, I'd look to the buying the 15 '01 LEAPS and selling the May 22.5s. Since you believe the stock is going sideways, if you can net $1/month (Right now the April is closing at Ask 1 1/8 the May is selling at BID 2 1/8) you can invest in LEAPS $12, get $12 return over the next year and still have $10 3/4 dollars on your LEAP this time next year (assuming volatility, stock price, etc all remain roughly the same). Don't get me wrong, I like the very low risk strategy Herm has laid out. I just got a different impression of your goals from reading your post.

To: Herm who wrote (10401)	4/17/1999 12:12:00 AM
From: NateC	Read Replies (2) \| Respond to of 14162

Herm...as always, you are teaching us, and challenging us. you wrote, you could buy with the same amount of money and control the value in LEAPs (CPQ CALL 15JAN01 @ 12) 9 contracts for the year 2001. That 900 shares of CPQ if you wanted to exercise later. UPSIDE GAP Your B.E. is $15 Strike + $12 LEAP cost = $27 before you have to act if CPQ gaps upward. Not hardly at this point! I'm trying to understand this better. If the 2001 LEAP 15Jan01 is at 12, when the stock is at 23......would there not be a rise in the LEAP price....when the stock goes to 27? I know it would be a low-delta rise...but the LEAP price will go up some, right?.....I'm having trouble understanding why the Breakeven would be $27.....you only have $12/share in the LEAP "investment".... So if CPQ goes up......your LEAP just goes up in value......I would think your BE would be whatever the stock price would be....at any point in time.......when the LEAP price is $12 again. sorry.....but if you could clarify a bit, it would be helpful