Bob,
I go out at least 9 months for the long side and chose a strike with
a delta beween 80 & 90. The time decay of the long leg will be a lot
less than the short side.
Don't be concerned about having to buy back the short side when the
underlying moves up. The gains you have in the long leg more than
make up the difference. (see the example I just posted). Just keep
enjoying the ride up. You will want to bail sometime after there is
less the 6 months left on the long side.
At 07:21 AM 4/7/2010, you wrote:
>
>
>I am trying it in two positions - MMR and PXP. I am not comfortable
>with what happens is the share runs up. I have not come to grips
>with how DITM the covering call should be to avoid time value
>issues. I guess ultimately - if the shares run up the profit is the
>difference in time value between the short and long position at the
>opening of the position. So - if the covering position is out in
>time - the time value could be about the same as the near short position.
>
>Help me on this one.
>
>If the short position simply expires - it works nicely.
>
>Bob
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