A new position was established today on ITG. The following is the trade information, including IB commissions:
22-Feb-07 - Initial Stock Position - BTO 100 ITG @ 45.36
22-Feb-07 - Initial Call Option - STO 1 Jul07 45.00 Call @ 4.79
Stock Investment: $4,536.00
Income Generated: $479.00
Percent Income Generated: 10.56%
Net Profit If Called: $443.00
Percent Return If Called: 9.77%
Annualized Return If Called: 24.09%
Days to Expiration: 148 days
Thursday, February 22, 2007
ATVI - New Position
A new position was established today on ATVI. The following is the trade information, including IB commissions:
22-Feb-07 - Initial Stock Position - BTO 100 ATVI @ 17.57
22-Feb-07 - Initial Call Option - STO 1 Aug07 17.50 Call @ 1.99
Stock Investment: $1,757.00
Income Generated: $199.00
Percent Income Generated: 11.33%
Net Profit If Called: $192.00
Percent Return If Called: 10.93%
Annualized Return If Called: 22.66%
Days to Expiration: 176 days
22-Feb-07 - Initial Stock Position - BTO 100 ATVI @ 17.57
22-Feb-07 - Initial Call Option - STO 1 Aug07 17.50 Call @ 1.99
Stock Investment: $1,757.00
Income Generated: $199.00
Percent Income Generated: 11.33%
Net Profit If Called: $192.00
Percent Return If Called: 10.93%
Annualized Return If Called: 22.66%
Days to Expiration: 176 days
Wednesday, February 21, 2007
SHFL - New Position
A new position was established today on SHFL. The following is the trade information, including IB commissions:
21-Feb-07 - Initial Stock Position - BTO 100 SHFL @ 25.52
21-Feb-07 - Initial Call Option - STO 1 Aug07 25.00 Call @ 2.99
Stock Investment: $2,552.00
Income Generated: $299.00
Percent Income Generated: 11.72%
Net Profit If Called: $247.00
Percent Return If Called: 9.68%
Annualized Return If Called: 19.96%
Days to Expiration: 177 days
21-Feb-07 - Initial Stock Position - BTO 100 SHFL @ 25.52
21-Feb-07 - Initial Call Option - STO 1 Aug07 25.00 Call @ 2.99
Stock Investment: $2,552.00
Income Generated: $299.00
Percent Income Generated: 11.72%
Net Profit If Called: $247.00
Percent Return If Called: 9.68%
Annualized Return If Called: 19.96%
Days to Expiration: 177 days
NVT - New Position
A new position was established today on NVT. The following is the trade information, including IB commissions:
21-Feb-07 - Initial Stock Position - BTO 100 NVT @ 34.31
21-Feb-07 - Initial Call Option - STO 1 Jul07 35.00 Call @ 3.13
Stock Investment: $3,431.00
Income Generated: $313.00
Percent Income Generated: 9.12%
Net Profit If Called: $382.00
Percent Return If Called: 11.13%
Annualized Return If Called: 27.27%
Days to Expiration: 149 days
21-Feb-07 - Initial Stock Position - BTO 100 NVT @ 34.31
21-Feb-07 - Initial Call Option - STO 1 Jul07 35.00 Call @ 3.13
Stock Investment: $3,431.00
Income Generated: $313.00
Percent Income Generated: 9.12%
Net Profit If Called: $382.00
Percent Return If Called: 11.13%
Annualized Return If Called: 27.27%
Days to Expiration: 149 days
GGC - New Position
A new position was established today on GGC. The following is the trade information, including IB commissions:
21-Feb-07 - Initial Stock Position - BTO 100 GGC @ 20.54
21-Feb-07 - Initial Call Option - STO 1 May07 20.00 Call @ 2.13
Stock Investment: $2,054.00
Income Generated: $213.00
Percent Income Generated: 10.37%
Net Profit If Called: $159.00
Percent Return If Called: 7.74%
Annualized Return If Called: 32.85%
Days to Expiration: 86 days
21-Feb-07 - Initial Stock Position - BTO 100 GGC @ 20.54
21-Feb-07 - Initial Call Option - STO 1 May07 20.00 Call @ 2.13
Stock Investment: $2,054.00
Income Generated: $213.00
Percent Income Generated: 10.37%
Net Profit If Called: $159.00
Percent Return If Called: 7.74%
Annualized Return If Called: 32.85%
Days to Expiration: 86 days
CLHB - New Position
A new position was established today on CLHB. The following is the trade information, including IB commissions:
21-Feb-07 - Initial Stock Position - BTO 100 CLHB @ 53.50
21-Feb-07 - Initial Call Option - STO 1 Apr07 50.00 Call @ 5.32
Stock Investment: $5,350.00
Income Generated: $532.00
Percent Income Generated: 9.94%
Net Profit If Called: $182.00
Percent Return If Called: 3.40%
Annualized Return If Called: 21.41%
Days to Expiration: 58 days
21-Feb-07 - Initial Stock Position - BTO 100 CLHB @ 53.50
21-Feb-07 - Initial Call Option - STO 1 Apr07 50.00 Call @ 5.32
Stock Investment: $5,350.00
Income Generated: $532.00
Percent Income Generated: 9.94%
Net Profit If Called: $182.00
Percent Return If Called: 3.40%
Annualized Return If Called: 21.41%
Days to Expiration: 58 days
BRCM - New Position
A new position was established today on BRCM. The following is the trade information, including IB commissions:
21-Feb-07 - Initial Stock Position - BTO 100 BRCM @ 35.27
21-Feb-07 - Initial Call Option - STO 1 Aug07 35.00 Call @ 4.33
Stock Investment: $3,527.00
Income Generated: $433.00
Percent Income Generated: 12.28%
Net Profit If Called: $406.00
Percent Return If Called: 11.51%
Annualized Return If Called: 23.74%
Days to Expiration: 177 days
21-Feb-07 - Initial Stock Position - BTO 100 BRCM @ 35.27
21-Feb-07 - Initial Call Option - STO 1 Aug07 35.00 Call @ 4.33
Stock Investment: $3,527.00
Income Generated: $433.00
Percent Income Generated: 12.28%
Net Profit If Called: $406.00
Percent Return If Called: 11.51%
Annualized Return If Called: 23.74%
Days to Expiration: 177 days
Saturday, February 17, 2007
XXIA - Closed
The XXIA Feb07 10.00 Call was exercised and the stock was called away for a profit. The following is the trade history and returns, including IB commissions.
Covered Call Results
Stock Investment: $3.181.00
Income Generated: $434.75
Net Profit: $253.75
Percent Return: 7.98%
Annualized Return: 8.74%
Duration of Trade: 333 days
Buy & Hold Comparison
Opening Price: $13.92
Closing Price: $11.17
P/L per Share: -$2.75
Shares: 100
Dividends: $0.00
Net Profit: -$275.00
Percent Return: -19.76%
Annualized Return: -21.65%
Duration of Trade: 333 days
Trade History:
20-Mar-06 - Initial Stock Position - BTO 100 XXIA @ 13.92 -
20-Mar-06 - Initial Call Option - STO 1 May06 12.50 Call @ 1.84 - Expired
23-May-06 - Continued Trade - STO 1 Nov06 12.50 Call @ 0.79 - Closed
23-Oct-06 - Buy Back - BTC 1 Nov06 12.50 Call @ -0.06 -
23-Oct-06 - Dollar Cost Averaging - BTO 200 XXIA @ 8.95 -
23-Oct-06 - Combined Cost Basis - $3,181.00 300 @ 10.60 -
23-Oct-06 - Continued Trade - STO 3 Feb07 10.00 Call @ 0.59 - Exercised
16-Feb-07 - Option Exercised - EX 3 Feb07 10.00 Call @ 10.00 -
XXIA was another risky stock, also delinquent in its regulatory filings and in danger of being de-listed. This doesn't meet my new criteria, so I let it get called away and again luckily got out at a profit.
As the chart for XXIA shows the stock hit a low of $7.03 in Jul06 or down about 49% and again I lowered my cost basis by dollar cost averaging. The stock then recovered slightly but still ended up down about 20%, yet I ended up with an 8.74% annualized return.
Covered Call Results
Stock Investment: $3.181.00
Income Generated: $434.75
Net Profit: $253.75
Percent Return: 7.98%
Annualized Return: 8.74%
Duration of Trade: 333 days
Buy & Hold Comparison
Opening Price: $13.92
Closing Price: $11.17
P/L per Share: -$2.75
Shares: 100
Dividends: $0.00
Net Profit: -$275.00
Percent Return: -19.76%
Annualized Return: -21.65%
Duration of Trade: 333 days
Trade History:
20-Mar-06 - Initial Stock Position - BTO 100 XXIA @ 13.92 -
20-Mar-06 - Initial Call Option - STO 1 May06 12.50 Call @ 1.84 - Expired
23-May-06 - Continued Trade - STO 1 Nov06 12.50 Call @ 0.79 - Closed
23-Oct-06 - Buy Back - BTC 1 Nov06 12.50 Call @ -0.06 -
23-Oct-06 - Dollar Cost Averaging - BTO 200 XXIA @ 8.95 -
23-Oct-06 - Combined Cost Basis - $3,181.00 300 @ 10.60 -
23-Oct-06 - Continued Trade - STO 3 Feb07 10.00 Call @ 0.59 - Exercised
16-Feb-07 - Option Exercised - EX 3 Feb07 10.00 Call @ 10.00 -
XXIA was another risky stock, also delinquent in its regulatory filings and in danger of being de-listed. This doesn't meet my new criteria, so I let it get called away and again luckily got out at a profit.
As the chart for XXIA shows the stock hit a low of $7.03 in Jul06 or down about 49% and again I lowered my cost basis by dollar cost averaging. The stock then recovered slightly but still ended up down about 20%, yet I ended up with an 8.74% annualized return.
RMBS - Closed
The RMBS Feb07 22.50 Call was exercised and the stock was called away for a profit. The following is the trade history and returns, including IB commissions.
Covered Call Results
Stock Investment: $5,310.00
Income Generated: $1,427.50
Net Profit: $617.50
Percent Return: 11.63%
Annualized Return: 14.24%
Duration of Trade: 298 days
Buy & Hold Comparison
Opening Price: $38.33
Closing Price: $22.63
P/L per Share: -$15.70
Shares: 100
Dividends: $0.00
Net Profit: -$1,570.00
Percent Return: -40.96%
Annualized Return: -50.17%
Duration of Trade: 298 days
Trade History:
24-Apr-06 - Initial Stock Position - BTO 100 RMBS @ 38.33 -
24-Apr-06 - Initial Call Option - STO 1 May06 35.00 Call @ 7.49 - Expired
23-May-06 - Continued Trade - STO 1 Nov06 35.00 Call @ 3.09 - Closed
25-Jul-06 - Buy Back - BTC 1 Nov06 35.00 Call @ -0.26 -
25-Jul-06 - Dollar Cost Averaging - BTO 100 RMBS @ 14.77 -
25-Jul-06 - Combined Cost Basis - $5,310.00 200 @ 26.55 -
25-Jul-06 - Continued Trade - STO 2 Jan07 25.00 Call @ 1.09 -
27-Dec-06 - Buy Back & Roll Out/Down - BTC 2 Jan07 25.00 Call @ -0.16 -
27-Dec-06 - Continued Trade - STO 2 Feb07 22.50 Call @ 1.04 - Exercised
16-Feb-07 - Option Exercised - EX 2 Feb07 22.50 Call @ 22.50 -
RMBS was a SysCW position I tried, which is something I'll never do again. I have a lot of respect for the folks at SysCW but I don't share their same risk tolerance. I've learned that you need to establish your own comfort level and stock criteria that's suitable for your risk tolerance, and not just follow someone else's trades. That goes for all of you reading this blog. Just because I establish a position in a certain stock doesn't mean that you should also. If a stock doesn't meet YOUR criteria then you shouldn't buy it, period.
RMBS is a very volatile stock with great premiums, but that's not a good enough reason to buy it. RMBS is delinquent in its regulatory filings and in danger of being de-listed, although NASDAQ recently stayed the de-listing. This is a very risky stock and doesn't meet my new criteria, so I let it get called away and luckily got out at a profit.
As the chart for RMBS shows the stock hit a low of $10.25 in Aug06 or down about 73%. I lowered my cost basis by dollar cost averaging in Jul06. The stock then recovered slightly but still ended up down about 41%, yet I ended up with an 14.24% annualized return.
Covered Call Results
Stock Investment: $5,310.00
Income Generated: $1,427.50
Net Profit: $617.50
Percent Return: 11.63%
Annualized Return: 14.24%
Duration of Trade: 298 days
Buy & Hold Comparison
Opening Price: $38.33
Closing Price: $22.63
P/L per Share: -$15.70
Shares: 100
Dividends: $0.00
Net Profit: -$1,570.00
Percent Return: -40.96%
Annualized Return: -50.17%
Duration of Trade: 298 days
Trade History:
24-Apr-06 - Initial Stock Position - BTO 100 RMBS @ 38.33 -
24-Apr-06 - Initial Call Option - STO 1 May06 35.00 Call @ 7.49 - Expired
23-May-06 - Continued Trade - STO 1 Nov06 35.00 Call @ 3.09 - Closed
25-Jul-06 - Buy Back - BTC 1 Nov06 35.00 Call @ -0.26 -
25-Jul-06 - Dollar Cost Averaging - BTO 100 RMBS @ 14.77 -
25-Jul-06 - Combined Cost Basis - $5,310.00 200 @ 26.55 -
25-Jul-06 - Continued Trade - STO 2 Jan07 25.00 Call @ 1.09 -
27-Dec-06 - Buy Back & Roll Out/Down - BTC 2 Jan07 25.00 Call @ -0.16 -
27-Dec-06 - Continued Trade - STO 2 Feb07 22.50 Call @ 1.04 - Exercised
16-Feb-07 - Option Exercised - EX 2 Feb07 22.50 Call @ 22.50 -
RMBS was a SysCW position I tried, which is something I'll never do again. I have a lot of respect for the folks at SysCW but I don't share their same risk tolerance. I've learned that you need to establish your own comfort level and stock criteria that's suitable for your risk tolerance, and not just follow someone else's trades. That goes for all of you reading this blog. Just because I establish a position in a certain stock doesn't mean that you should also. If a stock doesn't meet YOUR criteria then you shouldn't buy it, period.
RMBS is a very volatile stock with great premiums, but that's not a good enough reason to buy it. RMBS is delinquent in its regulatory filings and in danger of being de-listed, although NASDAQ recently stayed the de-listing. This is a very risky stock and doesn't meet my new criteria, so I let it get called away and luckily got out at a profit.
As the chart for RMBS shows the stock hit a low of $10.25 in Aug06 or down about 73%. I lowered my cost basis by dollar cost averaging in Jul06. The stock then recovered slightly but still ended up down about 41%, yet I ended up with an 14.24% annualized return.
BBBY - Closed
The BBBY Feb07 37.50 Call was exercised and the stock was called away for a profit. The following is the trade history and returns, including IB commissions.
Covered Call Results
Stock Investment: $11,162.00
Income Generated: $915.75
Net Profit: $1,003.75
Percent Return: 8.99%
Annualized Return: 7.26%
Duration of Trade: 452 days
Buy & Hold Comparison
Opening Price: $42.48
Closing Price: $42.59
P/L per Share: $0.11
Shares: 100
Dividends: $0.00
Net Profit: $11.00
Percent Return: 0.26%
Annualized Return: 0.21%
Duration of Trade: 452 days
Trade History:
21-Nov-05 - Initial Stock Position - BTO 100 BBBY @ 42.48 -
21-Nov-05 - Initial Call Option - STO 1 Dec05 42.50 Call @ 1.04 - Expired
23-Jan-06 - Interim Trade - STO 1 Mar06 40.00 Call @ 0.19 - Closed
21-Feb-06 - Buy Back - BTC 1 Mar06 40.00 Call @ -0.06 -
21-Feb-06 - Dollar Cost Averaging - BTO 100 BBBY @ 35.62 -
21-Feb-06 - Combined Cost Basis - $7,810.00 200 @ 39.05 -
21-Feb-06 - Continued Trade - STO 2 Apr06 40.00 Call @ 0.29 - Expired
24-Apr-06 - Continued Trade - STO 2 Aug06 40.00 Call @ 1.44 - Closed
30-Jun-06 - Buy Back - BTC 2 Aug06 40.00 Call @ -0.06 -
30-Jun-06 - Dollar Cost Averaging - BTO 100 BBBY @ 33.52 -
30-Jun-06 - Combined Cost Basis - $11,162.00 300 @ 37.21 -
30-Jun-06 - Continued Trade - STO 3 Feb07 37.50 Call @ 1.54 - Exercised
16-Feb-07 - Option Exercised - EX 3 Feb07 37.50 Call @ 37.50 -
BBBY was an old position established before I changed my criteria, so I allowed it to get called away. I'm slowly closing my old positions so I can establish new ones with my new criteria. As the chart for BBBY shows the stock hit a low of $30.92 in Jul06 or down about 27%. I lowered my cost basis by dollar cost averaging twice, once in Feb06 and again in Jun06. The stock then recovered back to slightly above the original price, so it end up basically flat during this holding period, yet I ended up with an 7.26% annualized return.
Covered Call Results
Stock Investment: $11,162.00
Income Generated: $915.75
Net Profit: $1,003.75
Percent Return: 8.99%
Annualized Return: 7.26%
Duration of Trade: 452 days
Buy & Hold Comparison
Opening Price: $42.48
Closing Price: $42.59
P/L per Share: $0.11
Shares: 100
Dividends: $0.00
Net Profit: $11.00
Percent Return: 0.26%
Annualized Return: 0.21%
Duration of Trade: 452 days
Trade History:
21-Nov-05 - Initial Stock Position - BTO 100 BBBY @ 42.48 -
21-Nov-05 - Initial Call Option - STO 1 Dec05 42.50 Call @ 1.04 - Expired
23-Jan-06 - Interim Trade - STO 1 Mar06 40.00 Call @ 0.19 - Closed
21-Feb-06 - Buy Back - BTC 1 Mar06 40.00 Call @ -0.06 -
21-Feb-06 - Dollar Cost Averaging - BTO 100 BBBY @ 35.62 -
21-Feb-06 - Combined Cost Basis - $7,810.00 200 @ 39.05 -
21-Feb-06 - Continued Trade - STO 2 Apr06 40.00 Call @ 0.29 - Expired
24-Apr-06 - Continued Trade - STO 2 Aug06 40.00 Call @ 1.44 - Closed
30-Jun-06 - Buy Back - BTC 2 Aug06 40.00 Call @ -0.06 -
30-Jun-06 - Dollar Cost Averaging - BTO 100 BBBY @ 33.52 -
30-Jun-06 - Combined Cost Basis - $11,162.00 300 @ 37.21 -
30-Jun-06 - Continued Trade - STO 3 Feb07 37.50 Call @ 1.54 - Exercised
16-Feb-07 - Option Exercised - EX 3 Feb07 37.50 Call @ 37.50 -
BBBY was an old position established before I changed my criteria, so I allowed it to get called away. I'm slowly closing my old positions so I can establish new ones with my new criteria. As the chart for BBBY shows the stock hit a low of $30.92 in Jul06 or down about 27%. I lowered my cost basis by dollar cost averaging twice, once in Feb06 and again in Jun06. The stock then recovered back to slightly above the original price, so it end up basically flat during this holding period, yet I ended up with an 7.26% annualized return.
Tuesday, February 6, 2007
SNDK - Adjustment
The following adjustment was made today on SNDK:
06-Feb-07 - Buy Back & Roll Out/Down - BTC 2 Feb07 50.00 Call @ -0.06 -
06-Feb-07 - Continued Trade - STO 2 Apr07 45.00 Call @ 1.39 -
This trade is an example of my revised rolling strategy of choosing the best call option, whether short or long term, based on the average premium. The Feb07 50 Call had very little time value left so I bought it back and rolled out to Apr07 and down to the 45 strike. I compared the premiums for the 45 call in Mar (1 month), Apr (2 months) & Jul (5 months). The Mar was selling for .50, the Apr for 1.40, and the Jul for 3.00. If you average out the premiums on a monthly basis, the averages are .50 for Mar, .70 for Apr, and .60 for Jul. So, I chose the Apr 45 call since it had the highest average premium.
Current Position Summary:
Stock Investment: $10,854.00
Income Generated: $2,374.00
Percent Income Generated: 21.87%
Net Profit If Called: $520.00
Percent Return If Called: 4.79%
Annualized Return If Called: 4.84%
Days to Expiration: 361 days
Trade History:
24-Apr-06 - Initial Stock Position - BTO 100 SNDK @ 59.56 -
24-Apr-06 - Initial Call Option - STO 1 Jul06 57.50 Call @ 7.09 - Closed
06-Jul-06 - Buy Back & Roll Out/Down - BTC 1 Jul06 57.50 Call @ -0.16 -
06-Jul-06 - Dollar Cost Averaging - BTO 100 SNDK @ 48.98 -
06-Jul-06 - Combined Cost Basis - $10,854.00 200 @ 54.27 -
06-Jul-06 - Continued Trade - STO 2 Oct06 55.00 Call @ 3.39 - Expired
23-Oct-06 - Continued Trade - STO 2 Jan07 55.00 Call @ 2.14 - Closed
19-Dec-06 - Buy Back & Roll Out/Down - BTC 2 Jan07 55.00 Call @ -0.16 -
19-Dec-06 - Continued Trade - STO 2 Feb07 50.00 Call @ 1.69 - Closed
06-Feb-07 - Buy Back & Roll Out/Down - BTC 2 Feb07 50.00 Call @ -0.06 -
06-Feb-07 - Continued Trade - STO 2 Apr07 45.00 Call @ 1.39 -
06-Feb-07 - Buy Back & Roll Out/Down - BTC 2 Feb07 50.00 Call @ -0.06 -
06-Feb-07 - Continued Trade - STO 2 Apr07 45.00 Call @ 1.39 -
This trade is an example of my revised rolling strategy of choosing the best call option, whether short or long term, based on the average premium. The Feb07 50 Call had very little time value left so I bought it back and rolled out to Apr07 and down to the 45 strike. I compared the premiums for the 45 call in Mar (1 month), Apr (2 months) & Jul (5 months). The Mar was selling for .50, the Apr for 1.40, and the Jul for 3.00. If you average out the premiums on a monthly basis, the averages are .50 for Mar, .70 for Apr, and .60 for Jul. So, I chose the Apr 45 call since it had the highest average premium.
Current Position Summary:
Stock Investment: $10,854.00
Income Generated: $2,374.00
Percent Income Generated: 21.87%
Net Profit If Called: $520.00
Percent Return If Called: 4.79%
Annualized Return If Called: 4.84%
Days to Expiration: 361 days
Trade History:
24-Apr-06 - Initial Stock Position - BTO 100 SNDK @ 59.56 -
24-Apr-06 - Initial Call Option - STO 1 Jul06 57.50 Call @ 7.09 - Closed
06-Jul-06 - Buy Back & Roll Out/Down - BTC 1 Jul06 57.50 Call @ -0.16 -
06-Jul-06 - Dollar Cost Averaging - BTO 100 SNDK @ 48.98 -
06-Jul-06 - Combined Cost Basis - $10,854.00 200 @ 54.27 -
06-Jul-06 - Continued Trade - STO 2 Oct06 55.00 Call @ 3.39 - Expired
23-Oct-06 - Continued Trade - STO 2 Jan07 55.00 Call @ 2.14 - Closed
19-Dec-06 - Buy Back & Roll Out/Down - BTC 2 Jan07 55.00 Call @ -0.16 -
19-Dec-06 - Continued Trade - STO 2 Feb07 50.00 Call @ 1.69 - Closed
06-Feb-07 - Buy Back & Roll Out/Down - BTC 2 Feb07 50.00 Call @ -0.06 -
06-Feb-07 - Continued Trade - STO 2 Apr07 45.00 Call @ 1.39 -
Friday, February 2, 2007
Selling Shorter Term Calls
If you read the Bit of History post you'd know that I started off selling front month call options. After a lengthy discussion with the folks at Systematic Covered Writing I switched to selling longer term call options. The main reason was to get more downside protection and generate more income up front. Making this change reduced my risk and had little to no affect on my average monthly returns (i.e. I've still maintained 2% average monthly return).
I took this a step farther and also sold longer term calls when rolling out the call options. Again, the purpose was to generate more cash up front. However, I recently modified my strategy to use shorter term calls when rolling. The reason is to generate more income in the long run rather than at the present time. I still sell longer term calls for the initial position, which provides the initial downside protection I require, but may sell shorter term calls if the initial call expires.
I basically compare the front month premium to the premium in further out months. If the front month call is selling for $1.00, I would require the two month call to sell for $2.00, and the three month call to sell for $3.00, etc.
For example, if I can get $1.00 for the one month or $1.50 for two months or $5.00 for six months. I’d sell the one month since it’s the better return. However, if the six month was $6.00 or higher I might sell that one instead, since it’s the same return but more income now.
While chatting with the folks at SysCW the other day, I learned that they also made a similar change and they provided me with a link to their Revised Recovery Strategy.
By using a combination of longer term calls on the initial position and shorter term calls, if the initial calls expire, I hope to improve my overall return.
I took this a step farther and also sold longer term calls when rolling out the call options. Again, the purpose was to generate more cash up front. However, I recently modified my strategy to use shorter term calls when rolling. The reason is to generate more income in the long run rather than at the present time. I still sell longer term calls for the initial position, which provides the initial downside protection I require, but may sell shorter term calls if the initial call expires.
I basically compare the front month premium to the premium in further out months. If the front month call is selling for $1.00, I would require the two month call to sell for $2.00, and the three month call to sell for $3.00, etc.
For example, if I can get $1.00 for the one month or $1.50 for two months or $5.00 for six months. I’d sell the one month since it’s the better return. However, if the six month was $6.00 or higher I might sell that one instead, since it’s the same return but more income now.
While chatting with the folks at SysCW the other day, I learned that they also made a similar change and they provided me with a link to their Revised Recovery Strategy.
By using a combination of longer term calls on the initial position and shorter term calls, if the initial calls expire, I hope to improve my overall return.
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