AN ALL-OPTIONS COVERED WRITE

摘要

It is possible, and sometimes preferable to put on a covered write without an underlying stock. This strategy also is known as a leveraged covered call and back on the old trading floor we used to call it a Fig Leaf. Here's how it works. The idea is based on a covered write but using long-term options (two or more years duration), known as Long term Equity Appreciation Strategies (LEAPS) as a stock substitute. You own an in-the-money LEAPS call and sell a two- or three-month out-of-the-money call against it. The profit/loss graph of the strategy looks like this: Notice that the profit and loss lines are not straight. That's because the LEAPS call is still open when the shorter-term call expires. Straight lines and hard angles usually indicate that all options in the strategy have the same expiration date.