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+Chapter 25: LEAPS 401 
+At this point, if XYZ rises in price by 1 point, the spread can be expected to lose 20 
+cents, since the delta of the short option is 0.20 greater than the delta of the long 
+option. 
+This phenomenon has ramifications for the diagonal spreader of LEAPS. If the 
+two strike prices of the spread are too close together, it may actually be possible to 
+construct a bull spread that loses money on the upside. That would be very difficult 
+for most traders to accept. In the above example, as depicted in Table 25-4, that's 
+what happens. One way around this is to widen the strike prices out so that there is 
+at least some profit potential, even if the stock rises dramatically. That may be diffi­
+cult to do and still be able to sell the short-term option for any meaningful amount 
+of premium. 
+Note that a diagonal spread could even be considered as a substitute for a cov­
+ered write in some special cases. It was shown that a LEAPS call can sometimes be 
+used as a substitute for the common stock, with the investor placing the difference 
+between the cost of the LEAPS call and the cost of the stock in the bank (or in T­
+bills). Suppose that an investor is a covered writer, buying stock and selling relative­
+ly short-term calls against it. If that investor were to make a LEAPS call substitution 
+for his stock, he would then have a diagonal bull spread. Such a diagonal spread 
+would probably have less risk than the one described above, since the investor pre­
+sumably chose the LEAPS substitution because it was "cheap." Still, the potential 
+pitfalls of the diagonal bull spread would apply to this situation as well. Thus, if one 
+is a covered writer, this does not necessarily mean that he can substitute LEAPS calls 
+for the long stock without taking care. The resulting position may not resemble a cov­
+ered write as much as he thought it would. 
+The "bottom line" is that if one pays a debit greater than the difference in the 
+strike prices, he may eventually lose money if the stock rises far enough to virtually 
+eliminate the time value premium of both options. This comes into play also if one 
+rolls his options down if the underlying stock declines. Eventually, by doing so, he 
+may invert the strikes - i.e., the striking price of the written option is lower than the 
+striking price of the option that is owned. In that case, he will have locked in a loss if 
+the overall credit he has received is less than the difference in the strikes - a quite 
+likely event. So, for those who think this strategy is akin to a guaranteed profit, think 
+again. It most certainly is not. 
+Backspreads. LEAPS may be applied to other popular forms of diagonal spreads, 
+such as the one in which in-the-money, near-term options are sold, and a greater quan­
+tity of longer-term (LEAPS) at- or out-of-the money calls are bought. (This was 
+referred to as a diagonal backspread in Chapter 14.) This is an excellent strategy, and