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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 (10555)	4/27/1999 7:56:00 AM
From: JimsJeeps	Read Replies (1) \| Respond to of 14162

Good Morning Nate, I am still trying to grasp using the leap as a stock surrogate, so please bear with me. In the example you sited, you bought the $40 Jan 2001 leaps at $20 and sold the $55. calls at $2.50, are you not in for a $2.50 loss if you are called out? Am I still confused as to how to calculate the profit or loss? Thanks for your help, Jim.

To: NateC who wrote (10555)	4/27/1999 10:33:00 AM
From: David Wright	Respond to of 14162

Gee, thanks NateC (Roger) for asking me to respond on something I have absolutely no experience with! i.e. LEAPs. However, never being at a loss for words... 1. You (probably) cannot buy a LEAP on margin. That means your $20 investment is the equivalent of a $40 investment in a margin account. Cuts your ROI in half immediately. 2. I can make a much better ROI on lower priced (but solid) stocks, that I buy on margin. When I do that, I have an asset in my account that I can use as margin collateral when I don't have it CC'd. What would you rather have in your account right now, MWHS, or your LEAP? 3. My stock doesn't have a built-in degrading factor like your LEAP does, as time wears on. As you know, I have likened the LEAP calendar spread to a railroad line with rails that are converging at unequal rates, with a bridge in front of it. 4. Using TA, I can reasonably predict where my stock is going to be as it cycles around in its trading range. Because there are at least four factors, mostly going in different directions, and at different rates, it is real hard to do so with a LEAP. To me, using a LEAP as an underlying platform for your CC program feels pretty shaky. 5. Watching anything that takes a year to expire is like watching wallpaper paste dry. This should be a fun debate.