Storm--Storm wrote: What an interesting strategy, Adam. I wonder also how well it would work to do it on a shorter term basis, like say 3 month at the money call options. Of course, the tax efficiency is nowhere near as good as your strategy, but the bonus is that you don't have to pay the premium for LEAPS.
PP options strategies are interesting.
I think they can be a lot of fun as long as only small amounts of money are involved. It's more like going to the racetrack than it is investing.
One thing that is fun to do is to pick whatever asset class is getting ragged on the most in the financial media and buy a short term call on it.
The reasons I chose LEAPS over a shorter term expiration are 1. taxes, and 2. b/c I believe that the majority of the time value of an option (like 3/4ths) is lost after the 3 month mark.
So if you have months left when you're rolling over your calls, you can mitigate some of the risk that might occur if you waited until closer to expiration and then something dramatic happened (b/c your options would at least have some time value left to cushion the blow from any intrinsic value lost).
May help the aircraft not to shake itself apart as rapidly. Also probably a good idea to use deep in the money options, if you can afford it.
For the record, I suspect that this strategy would probably have some impressive gains at times, but I doubt that it would perform much better than the regular PP...at least enough better to justify the downside volatility.
