2013's first Option expiry was quite propitious for the DITM portfolio:
First, my deeper DITM DIA was called away prematurely from its March 122 call, thanks to the current rally. For the 3 month's holding period the annualized % was 14.50%
Three stocks had risen too far to roll out farther ( not enough extrinsic option premium):
AYR (Aircastle), which was held 11 months had an annualized (nearly identical) return of 13.73%.
KKR which had a rollUP of calls, plus an additional purchase of 200 shares, totaled an annualized 24.91% for 8 months holding.
IP (Paper) was also hel 11 months and netted of commissions (always) 15.78%
Finally, WAG (Walgreen's) after being held 5 months, was called away for a measly 9.85%.
Love these rallies, but don't expect them to continue throughout the year.
With the VIX closing yesterday at 12.47, has there been any thought to Write Puts with 1 month expiration's to capture the premium? With the risk profile seemingly being the same, would this strategy make sense? How far in-the-money should the Put strike prices be? What are the pros and cons of implementing this strategy along with a DITM Covered Call strategy? I have purchased and your book and would be interested in your insight. Thank you in advance.
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