Replies to post #43258 on A.I.M. Users Bulletin Board (AIMUSERS)

[Toofuzzy]

Hi SF

Without looking up the exact numbers ( unless you have more questions)

I BOUGHT a $10 Jan 2021 call and sold a $20 Jan 2020 call.

Read your last paragraph. No..... I DONT want WPM to go down. ( though I am protected to $16.50 from price I wrote this about $17.50 )

Between buying and selling the options lets say my cost basis is $16.50 when the stock was at $17.50 ( just an example. I did take in more time premium on the $20 )

So it cost me $6.50 / share to control $27.50 + - worth of stock. So there is a bit of leverage in doing this.

So ideally WPM stays between $16.50 and $20, the $20 CALL expires worthless and I get to sell another call another year out.

My cost was $6.50 net ( lets say ) and I believe I took in $1.50 on the $20 call. So $1.50 / $6.50 = 23%. But there is 14 months till the $20 call expires so 23 / 14 months x 12 months = almost 20% if not called.

If called at $20 then $20 - $16.50 = $3.50
$3.50 / $6.50 net cost = almost 54% ( but I don't know when that will happen )

If called at expiration of $20 call then
54% / 14 months x 12 months = 46% annual return.

All of the numbers above are just off the top of my head so just an example. Don't mean to exaggerate potential return but roughly correct.

Don't want to take over the board with option trading so PM me if more questions.

Basically I am buying on margin with out paying margin interest. Then I sell an out of the money call to cover the time premium. I have to admit the $20 is below the next Aim directed sell price. It is sort of like LD AIM.

I pretend I actually own the shares but I know someone who Aims the option price ( he doesn't sell the upper leg ) and rolls them after a year and starts the Aim account over for simplicity of record keeping. He also is doing that with at the money options ( which I can't wrap my head around because of the high time premiums and potential for loss )

Toofuzzy