12000 Here we come!

Grab the mo-mo and moooooove! Pretty much the word of the day today, will it(Dow 12k) break? Will it hold? I'm going for yes and yes, so its a good day to play the momentum (tomorrow will probably be a bit of a carryover too).

I'm a buyer today of C April calls at $.89, I'm also a seller of C April 5's at $.21. Here's the twisted logic (follow at your peril) Based on ~1k share purchase (10 options), I have essentially purchased(I have placed an order to buy) 1000 shares at 4000 (1000shares x $4)+1000($.89)=$4890, NOW I SELL 10 options of C $5 call for $.21 which nets me 210, This part is a little tricky. I have just sold shares I technically don't own yet, but that I have already agreed to buy at $4- so now I have control over 1000 shares which I have then agreed to sell at $5. Its kind of a covered call on crack.

What does this do for me? Well now my basis price for C (currently trading at $4.86) is 4890-210=4680, and YET I have only put in $680 dollars! Excluding transaction costs, if the stock sits where it is for 2 months the sold $5 options expire worthless netting me $210 - .03 x 1000 shares, or $30 which means I 'made' $180 on a $680 trade which is a cool 26% for owning a stock that did nothing.

In case you were curious, if the stock goes up we obviously do better, sadly we are capped at 44% once/if the stock goes above $5. That would be a tough day.

I'm going to try and use this strategy a bit more in the upcoming weeks. I hope it made some sense.

Good luck and be careful!