These are pretty good Optionetics articles. Essentially, a long-term call can be thought of as owning an underlying stock, especially if it’s an in-the-money call and an expiration date farther into the future, because it has intrinsic value and is a more long-term holding than a front month call that you would sell against it. I did something like this on AAPL in November: bought a 2-month 75 ITM call, sold an 85 strike front-month calls for 2 months.  It worked out nicely as long as AAPL stayed above my long-term call’s strike price (75) which it did. And since it’s ITM I get more delta on the 75 strike’s gains.  My goal is to just get the calls I sell to pay for my theta (time decay) costs of owning the longer term call, which makes it cheaper to own than owning the stock outright.

Part 1
http://www.optionetics.com/market/articles/20794

Part 2
http://www.optionetics.com/market/articles/20826

You could also consider something like this using synthetic stock but it brings more downside risk.

The implied volatility on Research in Motion (RIMM) is through the roof! What a great time to sell some options. However, I don’t want to go naked so I’m considering some OTM covered calls that expire this week after buying some stock and just hoping they expire worthless. Or, if they get exercised then so be it, I still get to pocket my credit from selling these crazy-expensive options here. Earnings come out Thursday, options expire on Friday.

The question I should ask, as any good trader would, is “how much can I lose?” Well, my Optionetics pals don’t look on covered calls too well because they have unlimited risk (the stock has no downside protection). I can remove the unlimited risk by using a collar instead but then I have to put up extra money to buy the put to protect the downside.

I guess I’m not too worried about RIMM going to $0 anytime soon or to anything close to that and feel OK just placing a nice stop loss in case it goes south.