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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: FruJu who wrote (10405)	4/16/1999 1:52:00 PM
From: Roy Travis	Read Replies (3) \| Respond to of 14162

On Apr 14 1999, Evan Torrie wrote: >I've read all of this, but I still don't understand exactly how you >get out of the deal at expiration if the stock price has appreciated >past your strike price on the short term option. >For example, suppose I buy the Jan 2000 35 LEAP for $6 (stock >currently trading at 30). I sell the May 35 call for $2. So, my >NUT is $4. >Come May expiry, the stock has jumped and is trading at $36. My LEAP >is now worth, say $10, the May call is $1. What will my broker to do? >Will he just exercise my LEAP and lose any of the remaining time >value in the LEAP? >It seems to me the best thing to do in these situations is to >buy back the CALL, and roll out to a higher strike price, until my >NUT is eventually reduced down to 0. >What are people's strategies for this? I think this is a great question, an so far nobody has addressed it. I think this same question was raised about a couple of months ago, and nobody answered it then either. So what's the best strategy when you have a short call that's in danger of being exercised and it's covered by a long LEAP that still has lots of time value? --Roy