Monday, November 18, 2013

Quantifying the LEAP

Quantifying the LEAP: TSL Trina Solar Co.

At the risk of defeating my purpose of Long Term Holding of the LEAP strategy, here is a fine tuning of the TSL trade - a stock that has run up recently. It sacrifices Risk for Reward by rolling up Puts and Calls with the stock, and moving out  in time to 2016 as well.
                                                                        DEBIT          CREDIT
Aug. 2013: Bought 500 TSL at $8.97  :          $4494
            Sold 5 2015 Leap Calls - 10-strike:                            $1211
            Sold 5 2015 Leap Puts - 7 strike:                                $937
Oct 29: With stock "Leaping" to 15,
            Rolled 7-strike Puts up to 10:                                     493      (net of  936-443)        
Nov.18: Rolled Calls from 10-strike to 15        596                           (net of 4093 -3496,
            and out to 2016                                                                       releasing $2500 call
If called in Jan.2016 at 15:                                                     7500

                                                TOTAL:          $5090              $10,141

Current position: In the money covered calls, with stock at $16.77. Per cent profit if called away at 15 or above: 99% over 2 1/2 years (without further tweaking- TSL pays no dividends; most commission costs are included).

If stock settles between $10 and 15 ON! January 2016 expiry date, keep all option money, but paper loss of  $2500 on stock - $5 on 500 shares. Put on another Leap Strangle at current prices, e.g. $12 Call and $7 Put for 2018.

If TSL falls below $10 in 2016 expiry, you will have to buy back Put or take on 500 shares stock and do another OTM strangle.

If done in an IRA account, one must allow for the cash up front requirement of the puts - $7 X 500 ; in a margin account marginability of the stock bought plus Put and Call receipts should cover margin req., although minimum account margin ($5000?) is also required in an account.

No comments:

Post a Comment