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+396 Part Ill: Put Option Strategies 
+In summary, this is a position with tremendous, even dangerous, leverage. 
+In-the-Money Covered Call Write. The situation is slightly different if the 
+option is in-the-money to begin with. The above margin requirements actually don't 
+quite accurately state the case for a margined covered call write. When a covered call 
+is written against the stock, there is a catch: Only 50% of the stock price or the strike 
+price, whichever is less, is available for "release." Thus, one will actually be required 
+to put up more than 50% of the stock price to begin with. 
+Example: XYZ is trading at 50, and there is a 2-year LEAPS call with a strike price 
+of 30, selling for 25 points. One might think that the requirement for a covered call 
+write would be zero, since the call sells for 50% of the stock price. But that's not the 
+case with in-the-money covered calls. 
+Margin requirement: 
+Buy stock: 50 points 
+Less option proceeds -25 
+Less margin release* -15* 
+Net requirement: 10 points 
+* 50% of the strike price or 50% of stock price, whichever is less. 
+This position still has a lot ofleverage: One invests 10 points in hopes of making 5, if 
+the stock is called away at 30. One also would have to pay interest on the 15-point 
+debit balance, of course, for the two-year duration of the position. Furthermore, 
+should the stock fall below the strike price, the broker would begin to require main­
+tenance margin. 
+Note that the above "formula" for the net requirement works equally well for 
+the out-of-the-money covered call write, since 50% of the stock price is always less 
+than 50% of the strike price in that case. 
+To summarize this "free ride" strategy: If one should decide to use this strate­
+gy, he must be extremely aware of the dangers of high leverage. One must not risk 
+more money than he can afford to lose, regardless of how small the initial investment 
+might be. Also, he must plan for some method of being able to make the margin pay­
+ments along the way. Finally, the in-the-money alternative is probably better, because 
+there is less probability that maintenance margin will be asked for. 
+SELLING UNCOVERED LEAPS 
+Uncovered option selling can be a viable strategy, especially if premiums are over­
+priced. LEAPS options may be sold uncovered with the same margin requirements 
+as short-term options. Of course, the particular characteristics of the long-term 
+option may either help or hinder the uncovered writer, depending on his objective.