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Ask Alan 198 – The Significance of Breakeven When Setting up Our Poor Man’s Covered Call Trades

Alan answers a question posed by Sam, who asks:

Alan,
I have a question regarding the setup of the following your strategy. Based upon your entry conditions, I find it very hard to find a setup that works unless I go very deep ITM to the .94-.97 range when selecting my LEAPS. For example, with IBM, using the $120 with a .75 note that exceeds current stock price. Would you go so far ITM for the LEAPS? How would you set up this trade?
Thanks,
Sam

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About Alan Ellman

Alan Ellman loves options trading so much he has written four top selling books on the topic of selling covered calls, one about put-selling and a sixth book about long-term investing. Alan is a national speaker for The Money Show, The Stock Traders Expo and the American Association of Individual Investors. He also writes financial columns for both US and International publications along with his own award-winning blog.. He is a retired dentist, a personal fitness trainer, successful real estate investor, but he is known mostly for his practical and successful stock option strategies.

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