Let's say I am bullish on company XYZ at the current price. I feel like it is priced well and will appreciate over the long term.
I can sell an OTM put on XYZ at a lower price than it is currently trading and win either way:
- If the stock's price doesn't drop and I'm not assigned, I'll collect the put premium on expiration and be able to do it again
- If XYZ drops, I collect the put premium and get to own it at an even lower price than if I had bought it at the initial price
While I like this strategy, I also like to own deep in-the-money call LEAPs on stocks instead of owning the stock outright. I'm able to get more leverage than buying the stock outright and it allows me to reduce short term risk due to fluctuations in share price.
Can I do the same thing as above, namely selling and if the stock price drops, have the leap assigned to me? What is it I could sell and what would be the mechanism to get the LEAP assigned to me?