Secondary Call Sales on LEAPS

If you were not able to sell your initial LEAP for cost plus 5% then you should follow the rules for secondary call sales as detailed by Hooper and Zalewski in their book, Covered Calls and LEAPS, a Wealth Option.

1. A secondary call can only be sold when the markets are in the green.
2. It can only be sold after implementing either the 10 cent rule or the 5% buyback rule.
3. A secondary call cannot be sold if the mkt. bid price of the LEAPS is within 10% of your GTC sale price.
4. A secondary call can only be sold with the formalized seven day rule has been satisfied.
5. A secondary call sale should generate a minimum of 10 percent uncalled return.
6. The aim is to buy back the call for a net uncalled return of 5%.
7. It is preferable to select the same call strike price as the strike price used when the position was established.
8. Preference should always be given to a shorter term call if this provides the minimum uncalled return requirement of 10 percent.
9. If a min. 10% uncalled return with the same strike cannot be maintained, drop the strike one increment toward in the money.
10. Continue to drop to generate yield up to the point that the call strike price is equal to the LEAPS strike price.
11. If the 10% cannot be generated then the LEAPS should be repositioned.