Monday, January 13, 2014

Happy New Year

As readers have noticed there has not been much activity in DITM recently. After 4 years of successful 11% returns per year in my small IRA ( a surrogate for DITM) the Groundhog Day steady rise in the markets have crushed Volatility, and new positions and rollouts have been infrequent.

More concentration has been on the Leap Strangle strategy which I embarked on just over a year ago. This has done better, despite a errant reliance on gold and precious metals' stocks, which should recover in time. Those that do not will result in rolling down of the calls and taking on more stock via the sold OTM puts (in a sense, doubling down).

As of today, with the first position - BAC- taken in Dec.'12, and adding 1 or 2 laddered monthly through last week, where I leapt into YRCW! Quite a risky trade, but the IV was over 100 on both puts and calls, to where I brought in with option premium almost as much as I spent on the stock! There is a reason for high IV - RISK- which I saw the next few days, when the stock dropped to below my sold put, at least temporarily.

Even with a very recent paper loss in YRCW and four other gold, silver and coal stocks ( of the 17 now in the strategy) going negative so far, the winners have propelled the 13 month return to a cumulative 13.67%. This does not include any max loss requirement for the puts if done in an IRA.

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