What do you guys think about tweaking LEAPs to a modified covered straddle? In other words using WDC as example at current prices, buy at leaps call either ITM or close to money, then sell weekly/monthly straddles against it. You could also buy an OTM put leap as disaster insurance. Similar to our synthetic long/shorts but the advantage by selling a straddle or strangle each week is that you bring in a lot more premium, double in most cases but on individual names I don’t like selling calls naked. Burned on HNZ a few years ago on a strangle.

For WDC example BTO 85 2020 call. STO 12/8 87 call. STO 12/8 85 put. Could put it on for about 15.62 at current prices. On a 10 lot break evens of 84.2 and 93.61 with 11 day profit of 2554 max.

Adding a 75 2020 put would add 12.30 or so and narrow the break evens and lower max profit to 1321 but limits downside risk to 10 points. With 781 DTE that would give potentially 111 weeks to sell straddles. Figure 25% would need adjustment but still a killer return. Figure $3-4 premium each week with ATM options could cover the entire trade in about 3-5 weeks if, and a big if everything stays in a tight range.

The reason I am thinking about this is I accidentally did this with GILD and selling straddles/strangles has really improved my recovery on a trade gone wrong. Going out 2-4 weeks I can sell an ATM straddle for about 4. I was assigned at 79, cost basis was 78.1 and change. 2 weeks of selling straddles I am almost at break even with GILD at 71.55 and have some long LEAPS puts at 77.5. So effectively covered on both sides and can sell the crap out of weekly options to both sides without having to tap into too much margin.

Thoughts, comments? Anyone else doing this or tried it?