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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Richard Nehrboss who wrote (57465)	4/27/1999 12:07:00 PM
From: Knighty Tin	Respond to of 132070

Richard, If you are starting from a point of an appreciated stock, a spread conversion does make more sense. I was talking about starting from ground zero. You are only right about calendars, selling the nearer term call, buying the longer term put, if the stock is flat. If it moves up rapidly, you lose the higher put premium. That isn't a huge problem since you are writing out of the money calls and would also collect more in the way of cap gains. However, if the stock collapses, the near term call does not offer enough downside protection to prevent a loss. At some point, the Leap put kicks in, but you can lose money from your starting pointing. By selling matched and not calendar calls with long puts, you can eliminate any downside risk, though it will not annualize nearly as well if the stock stays flat.