There are many ways to view this...This is how I look @ it...
I originally bought the ~NVDA~ Jan 17.50's for (link back) so my basis is 4.35 = $4,350.00
I then sold the June 21's for .88 = $880.00 I bought back today @ .15 = $150.00 = profit of $730.00
So I basically reduced my Basis (& it looks like this) 4.35 - .73 = 3.58 So my new basis is now 3.58 or $3,580.00
I then waited for a bounce...got it...re-established a new short (~NVDA~ Jun 19 calls @ .60 = $600.00)
So in effect my new basis is 3.58 - .60 = 2.98 (I might not get the whole .60, but you can see what I am doing...Eventually, my long LEAP position will pay for itself...
Hope this helps some see what this method is about...(this is just my view & how I learned)
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.