The reason this Zero blog has been idle recently is that with the market virtually unchanged for the past 19 months, DITM positions are also the same, except for option rollouts. Mostly I have been following gold and hedges with UVXY (which decays like an option).
NUGT is a gold triple strength ETF, 3 X the GDX gold miners. It is as volatile on the downside !! as the upside, which has leaped from around $20 (where I first bought it) to its current 160 level just within this year (6 months). Not unlike DITM, I have been walking up ITM covered calls, milking the huge IV (premium) at 26, 50, 60 and now 110.
With the UVXY, I have recently been selling puts to take on this double-strength hedge, in case of a severe downturn in the stock market. This is the second longest Bull market, is in the danger cycle of the year, and the wrong sectors seem to be leading it. With the futures rollovers, however, it is a wasting asset, which, like the TVIX, go to near zero and do a reverse split.
Handle these with extreme care!!
Monday, July 11, 2016
Tuesday, July 14, 2015
BOOK 'EM DANO
Shades of Hawaii 5-0.
I just closed out my Barnes 'n Noble Leap Strangle. It was going fine but in August they spin off some Education part - BNED, which makes options even messier (covered calls, puts). Nice profit for just over i year - 28+%. Plus the safety of having brought in $$ to hedge. (Does not include margin sequester for the put - only the stock cost.).
Did take minor losses on CHK (oil) and FCX (copper) - as China sells commodities to raise cash for the $4T market loss (Their GDP is only $10T.
I just closed out my Barnes 'n Noble Leap Strangle. It was going fine but in August they spin off some Education part - BNED, which makes options even messier (covered calls, puts). Nice profit for just over i year - 28+%. Plus the safety of having brought in $$ to hedge. (Does not include margin sequester for the put - only the stock cost.).
Did take minor losses on CHK (oil) and FCX (copper) - as China sells commodities to raise cash for the $4T market loss (Their GDP is only $10T.
Tuesday, July 7, 2015
GOOD NEWS, BAD NEWS
A couple of trades this week to avert disaster. The chart on Intel looks as bad as many dividend-paying stocks that are being sold now (per Barron's top 50 dividend payers were down 6%, bottom 50 are up 6% YTD). Plus INTC's future doesn't look to rosy. Sold the stock for a slight loss, but thanks to DITM and a put rollup, I made a profit overall of nearly 3% in 9 months.
Not so good on my Leap Strangle of FCX , put on in Jan. of this year. Again, the future of commodities, along with global economies, looks longer term than expected - China, Europe, et.al.
Overall loss was $1100 on 200 shares with the stock down over 6 points. Strangle saved me about $200, as I had to buy back the put much higher, and the dividend was cut.
Not so good on my Leap Strangle of FCX , put on in Jan. of this year. Again, the future of commodities, along with global economies, looks longer term than expected - China, Europe, et.al.
Overall loss was $1100 on 200 shares with the stock down over 6 points. Strangle saved me about $200, as I had to buy back the put much higher, and the dividend was cut.
Monday, June 8, 2015
TORPEDO AHEAD
c
Another disappointing security was just sold, minimizing the loss with dividends and ITM calls: Century Tel (CTL).
Bought 200 shares at 40.54, and gave up today with huge Insider Selling (Form 4), despite B rating by Schwab and 5 star by S&P !! Sold at 32.28 ($1669 loss) ameliorated by $700 div'ds and calls sold, for a loss of $975. Better than just owning the stock and watching it drop.
Once again DITM not only enhances return, but minimizes losses.
Current positions include VZ, CVX, INTc, GM, GG, UVV, VNR (partially called away).
With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance
Bought 200 shares at 40.54, and gave up today with huge Insider Selling (Form 4), despite B rating by Schwab and 5 star by S&P !! Sold at 32.28 ($1669 loss) ameliorated by $700 div'ds and calls sold, for a loss of $975. Better than just owning the stock and watching it drop.
Once again DITM not only enhances return, but minimizes losses.
Current positions include VZ, CVX, INTc, GM, GG, UVV, VNR (partially called away).
With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: brentleonard.com for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Amazon.com: Zero (IN)Tolerance
Friday, January 30, 2015
NUGT update
Having stayed with the triple strength GDX etf from my Buy price of $35 to below $10 !! , after buying back my 40 call, I just today resold a 2017 LEAP call - the 25-strike for $7; IV (Implied Volatility) is still @100. NUGT's underlying - GDX- is an etf on the best of gold stocks, so shouldn't go away like a bad stock. To me it appears oversold with juicy volatility - a good way to play an eventual gold rally.
Another way is just to buy the GGN, yielding 11% while you wait - also oversold.
Another way is just to buy the GGN, yielding 11% while you wait - also oversold.
Friday, January 23, 2015
Hi, Ho, SILVER
Although Volatility (VIX) is back - hopefully- and DITM will return to its 10% return, I still like doing the Leap Strangles when I find them. Especially with high IVs (Implied Volatility). Last November I put on a covered call on PAAS (Pan Am Silver) a Canadian company. I was leery of selling the put side, but after it fell from $16 to below $9 and started to rally, I thought it might be time to sell the other leg.
Leap strangles are not Risk-Free ( I found that out buying the 3X gold ETF: NUGT which I bought at $35, and saw it fall to below $10, but it is working out with fine tuning). The numbers on PAAS are this:
Bought 300 at $3220, sold a call (2017 at 12 strike) for $613; just now sold the put (10 strike also 2017) for $730; it should pay over 4% dividend before January 2017 - $338; and I hope to have it called away at 12 then ($3600). Profit over 27 months $2060 or 64%. Annualized over 12 months - 28%. Considering the safety of bringing in the $$ initially, plus the return, it looks good. The IV is only 50 - half the IV of the NUGT, which is over 100, on the puts and calls.
Leap strangles are not Risk-Free ( I found that out buying the 3X gold ETF: NUGT which I bought at $35, and saw it fall to below $10, but it is working out with fine tuning). The numbers on PAAS are this:
Bought 300 at $3220, sold a call (2017 at 12 strike) for $613; just now sold the put (10 strike also 2017) for $730; it should pay over 4% dividend before January 2017 - $338; and I hope to have it called away at 12 then ($3600). Profit over 27 months $2060 or 64%. Annualized over 12 months - 28%. Considering the safety of bringing in the $$ initially, plus the return, it looks good. The IV is only 50 - half the IV of the NUGT, which is over 100, on the puts and calls.
Wednesday, January 14, 2015
Timing Is Everything
Statistics show that mutual funds that outperform invariable underperform five years later - the same may be true of investment strategies. I started DITM in May of 2009, two months after the Fed-driven BULL market started in March '09, and was probably not the best strategy for that era, although for 5 years it did produce @ 10% with SAFETY.
According to Schwab Research, the Bull market is far from over but could get pretty choppy for awhile, raising the IV (Implied Volatilities) of stocks and necessitating more hedging.
Today I put on a trade of CQP - Cheniere - just below $30, with a June 28 call; should go ex-D end of Jan. with a nice dividend % and safety net (History record, not a recommendation!).
As I have not updated DITM regularly, readers might want to "SUBSCRIBE" to my Examiner.com column, which has been regular on Mondays for over two years, with commentary on markets, Sentiment, Leaps and maybe more DITM: http://www.examiner.com/stock-market-in-san-francisco/brent-leonard.
It is free with no obligation (occasional irritating commercials!).
According to Schwab Research, the Bull market is far from over but could get pretty choppy for awhile, raising the IV (Implied Volatilities) of stocks and necessitating more hedging.
Today I put on a trade of CQP - Cheniere - just below $30, with a June 28 call; should go ex-D end of Jan. with a nice dividend % and safety net (History record, not a recommendation!).
As I have not updated DITM regularly, readers might want to "SUBSCRIBE" to my Examiner.com column, which has been regular on Mondays for over two years, with commentary on markets, Sentiment, Leaps and maybe more DITM: http://www.examiner.com/stock-market-in-san-francisco/brent-leonard.
It is free with no obligation (occasional irritating commercials!).
Tuesday, January 6, 2015
UGLY AVON
Not a great way to start the year, but I was forced to cut short my losses in the LEAP Strangle on AVP (Avon) which has been circling the drain for years. At a 2013 high of $24, I bought the stock at $14.45 but had to give up at $8.70! Chart shows no hope of this major old company surviving. It is the first time I have lost money on both the stock and the options, not being protected by the Leaps in all other losing cases. Loss on 500 shares bought just last May was $2898 on the stock and $1158 net on both Puts and Calls - Totaling $3996 after $60 back in dividends -whoopee!
Gold is starting to rally in 2015, but there is small hope there yet, with the $ so strong.
Gold is starting to rally in 2015, but there is small hope there yet, with the $ so strong.
Friday, December 12, 2014
Game Stoploss
Despite aforementioned disappointment at the lower Volatility causing a switch after 5 years from DITM to the Leap Strangle strategy, I continue to test it in my small IRA, but with 1/2 of the funds in cash until the end of this downturn - which I expect any day, with an upsurge into NY Day and beyond. My Examiner.com column: http://www.examiner.com/stock-market-in-san-francisco/brent-leonard, extols the virtues of 2015 technically and cyclically - feel "free " to read and even Subscribe weekly to it if you like. It is now in its third year, as the DITM is in its 10th.
A good example of why I like DITM as well as Leap Strangles for double digit returns as well as Safety! is the blood-letting in many metal and energy stocks, but also Gamestop - GME.
In my IRA I note that the stock is down from my buy price - $39- t just below $33 on 200 shares (normally a $1200 paper loss! According to my Schwab EDGE platform, having sold the 2016 40 strike (actually OTM when sold) , the profit on "milking" the premium is $1130 - so, adding $265 in dividends, the position is actually about even, if closed out today. Strangles work the same way, but add Sold Puts to the equation.
Remaining DITM positions include GE and INTC.
A good example of why I like DITM as well as Leap Strangles for double digit returns as well as Safety! is the blood-letting in many metal and energy stocks, but also Gamestop - GME.
In my IRA I note that the stock is down from my buy price - $39- t just below $33 on 200 shares (normally a $1200 paper loss! According to my Schwab EDGE platform, having sold the 2016 40 strike (actually OTM when sold) , the profit on "milking" the premium is $1130 - so, adding $265 in dividends, the position is actually about even, if closed out today. Strangles work the same way, but add Sold Puts to the equation.
Remaining DITM positions include GE and INTC.
Thursday, December 4, 2014
LEAP Update
As the new year approaches, and the 2nd anniversary of my LEAP Strangle strategy implementation I am starting to record the results great and not-so-great as the first batch -2015- are due to expire. With the opening of the 2017 Leaps this Fall, almost all Calls and Puts have been rolled (Out, up and Down).
Today's rollout was on Ford (F) which was bought in January 2013 - 23 months ago:
Cost: 200 shares at $13.69 : $2738
Profit from dividends and options: $1330
Current Price $15.83: $3166
Profit if closed out: $1276, or 46.4%
Instead I rolled out both Puts and Calls for $214 and $268, respectively- another $482. So if F stays UNCH until January 2017, profit is $1758 or 64% over 4 years, or 16%/year with no monitoring or fine-tuning.
The best part is the safety net provided by funds brought in: there would be no loss unless F dropped below $7/share (dividends included).
Not so profitable have been my mistaken positions into Gold and Energy, which still have time to play out as they are rolled down and out.
Today's rollout was on Ford (F) which was bought in January 2013 - 23 months ago:
Cost: 200 shares at $13.69 : $2738
Profit from dividends and options: $1330
Current Price $15.83: $3166
Profit if closed out: $1276, or 46.4%
Instead I rolled out both Puts and Calls for $214 and $268, respectively- another $482. So if F stays UNCH until January 2017, profit is $1758 or 64% over 4 years, or 16%/year with no monitoring or fine-tuning.
The best part is the safety net provided by funds brought in: there would be no loss unless F dropped below $7/share (dividends included).
Not so profitable have been my mistaken positions into Gold and Energy, which still have time to play out as they are rolled down and out.
Tuesday, October 28, 2014
BEENAWHILE
Now that we are through (hopefully) the volatile Sept./Oct. period and into the best 3 months of the year for the markets -statistically, I put on three recent positions for the Leap Strangle. I gave a talk last weekend to the San Francisco Bay Area Options Group on the results so far.
The concept is high yield with money brought in from both OTM (out-of-the-money) options for immediate insurance, which decay over time.
The Three trades were:
LeapYear #shares stock Px Amount Call Put
The concept is high yield with money brought in from both OTM (out-of-the-money) options for immediate insurance, which decay over time.
The Three trades were:
LeapYear #shares stock Px Amount Call Put
| 2017 | 200 | 18.34 | 3677 | 366 | 490 |
| 2016 | 500 | 6.84 | 3426 | 396 | 187 |
| 2016 | 500 | 7.84 | 3929 | 941 | 1212 |
We shall see in the fullness of time!
Monday, August 4, 2014
Zero Dark 2000
In another futile attempt to breach the triple zero on the SPX the expected selloff last week was aborted today (so far) byt he old reliable McClellan Oscillator dropping below -50 Friday (minus 89!). August has not been very profitable the past three years, and the JASON (July-Nov.) period spells caution as well. A/D on the NYSE was terrible (-2288 net declines); Insider selling is still heavy, but steady - especially Gold, where commercial traders are huge.
Monthly figures for ETF flows for June finally arrived, with increases in all, except bonds - margin interest again rose to almost new highs, which is positive for the market, via correlation.
Here are the numbers:
Monthly figures for ETF flows for June finally arrived, with increases in all, except bonds - margin interest again rose to almost new highs, which is positive for the market, via correlation.
Here are the numbers:
| Date> | 8/1/2014 | 7/26/2014 | |
| Indices: | DJIA | 16493 | 16960 |
| NAZ | 4352 | 4449 | |
| SPX | 1925 | 1978 | |
| WklyVolume (Bshs). | naz/ny | 9.9/3.6 | 8.7/2.9 |
| Specul.Ratio hi=bullish | 2.8 | 3 | |
| Sentiment: | put/call-CBOE | 68 | 60 |
| VIX>50-alltmlow=8.8 | 17 | 12.7 | |
| Advance/Dec-NYSE.. | 484/2772 | 1503/1720 | |
| Weekly Net: | -2288 | -217 | |
| Cumulative: | 161470 | 163758 | |
| Weekly | NYSE hi/low | 260/191 | 435/91 |
| New Hi's/Low's | Nasdaq h/l | 149/254 | 201/145 |
| McClellan | Oscillator | -89 | -31 |
| McClellanSum | .+750/-1000 | 287 | 599 |
| Newsletter | Inv.Intel -Bull:tues | 55.6 | 56.5 |
| Surveys | Bear:-5yrs | 16.2 | 17.2 |
| AAII -Bull :wed. | 31.1 | 29.6 | |
| Bear | 31.1 | 29.9 | |
| COT:SPX w/w | large/small (net)k | .3/5 | .2/6 |
| COT:gold comm.hedg | long-short.000 | (149k) | (160k) |
| CEOinsider | selling | 22:1 | 44:1 |
| off.&bd b/s.vs. | 10% holder b/s | 175:25 | 175:20 |
| 3-box rev | Bullish%- | 74 | 83 |
| US equity -ICI | Fund Flows | WeekDelay | (1.4B) |
| MMF flows | Change in $B | (8.8B) | (2.2B) |
| MargDebt- top (300M) | monthly | 464B | MAY |
| ETF:mthlyEqty/ | Int'l/Bond-$B | 1116/440/274 | MAY |
| 2-yr Tsy Yield: Inflation | 0.48% | 0.49% | |
Monday, July 28, 2014
Endless Summer
Still waiting for a meaningful correction, but could not resist a trade on Calumet (CLMT) - DITM covered call of Feb 30, with the stock at $33 (10% protection through the best months of the year - Nov.-Jan.
Had to wait for it to go ex-dividend , which it just did. 8% plus some downward Insurance of a few pence.
N.B. as of May 1 - 2014 , 4(closed) trades have netted 14% annualized; Including closed trades (8) started in 2013 - up 13.4%. No losses, but low Volatility (IV).
Also covered in this blog is the LEAP portfolio, which offers more safety and yield by selling covered LEAP (longterm) strangles - out-of-the-money covered calls and puts. One can put on a trade an just let it stand for months (years), or fine-tune it for more yield and safety (cash brought in.
In the latter case, I rolled my AA (Alcoa) puts upward and out to 2016 for a $300 gain, as the stock has jumped more than a double since I bought it. With the LEAP plan, although my covered calls of 2105 are at the 10 strike (now ITM) it will most likely be called away in January (rolling out deep in-the-money calls is seldom very profitable - extrinsic premium).
2017 LEAPS should be coming out in October, but why sit on a way ITM put that sells for $.02??
Finally, as an example of how DITM can act as a hedge as well as conservative yield-provider (consistently 10%), another trade rears its pretty head today. Just as an infrequent loss can be devastating (but less than just owning the stock) since one can keep from getting "shaken out" with the lower covered call, so can a pleasant outlier occur to the upside:
This week Kinder MLP (KMP) was called away from my IRA after 6 months - with 6 months left on the January 2015 call!!! Very unusual, but happens if the buyer wants to exercise it way ahead!
I bought KMP at above $80 and sold the in-the-money (ITM) call at 77.50; the stock immediately dropped 10 points, but I held on due to the June call, which became int the money again in June, and I rolled out to January '15. Called away at 77.50 I would have lost $300 - but with DITM (call premiums and dividends) I netted $437 after commissions, for a 10.85% annualized profit - right on its usual mark.
Had to wait for it to go ex-dividend , which it just did. 8% plus some downward Insurance of a few pence.
N.B. as of May 1 - 2014 , 4(closed) trades have netted 14% annualized; Including closed trades (8) started in 2013 - up 13.4%. No losses, but low Volatility (IV).
Also covered in this blog is the LEAP portfolio, which offers more safety and yield by selling covered LEAP (longterm) strangles - out-of-the-money covered calls and puts. One can put on a trade an just let it stand for months (years), or fine-tune it for more yield and safety (cash brought in.
In the latter case, I rolled my AA (Alcoa) puts upward and out to 2016 for a $300 gain, as the stock has jumped more than a double since I bought it. With the LEAP plan, although my covered calls of 2105 are at the 10 strike (now ITM) it will most likely be called away in January (rolling out deep in-the-money calls is seldom very profitable - extrinsic premium).
2017 LEAPS should be coming out in October, but why sit on a way ITM put that sells for $.02??
Finally, as an example of how DITM can act as a hedge as well as conservative yield-provider (consistently 10%), another trade rears its pretty head today. Just as an infrequent loss can be devastating (but less than just owning the stock) since one can keep from getting "shaken out" with the lower covered call, so can a pleasant outlier occur to the upside:
This week Kinder MLP (KMP) was called away from my IRA after 6 months - with 6 months left on the January 2015 call!!! Very unusual, but happens if the buyer wants to exercise it way ahead!
I bought KMP at above $80 and sold the in-the-money (ITM) call at 77.50; the stock immediately dropped 10 points, but I held on due to the June call, which became int the money again in June, and I rolled out to January '15. Called away at 77.50 I would have lost $300 - but with DITM (call premiums and dividends) I netted $437 after commissions, for a 10.85% annualized profit - right on its usual mark.
Friday, July 11, 2014
QUICKIE
In my latest DITM trade the good news for FCX - Freeport Copper- is that the annualized return, net of commissions, spreads, and other slippage, was 11% - too bad it only lasted 3 months! Buying it in April and having the August call (the 31 ITM) exercised on my, with the stock over $38 it was too ITM to be rolled out in time.
Since this 200 share trade was in my small IRA, I shall probably do another DITM trade soon to keep this statistic "pure", not mingled with the LEAP Strangle plan, which I now prefer, with Volatility as low as it is these days.
Per my Schwab account statement for the semi-annual 2014 period, what with above slippage and sloth, Reg T-3 (3 day settlement of funds, etc.) the IRA gained 3.40%, making it an annualized 6/80%, unless the VIX picks up, and premium returns.
Keep the Faith!
Since this 200 share trade was in my small IRA, I shall probably do another DITM trade soon to keep this statistic "pure", not mingled with the LEAP Strangle plan, which I now prefer, with Volatility as low as it is these days.
Per my Schwab account statement for the semi-annual 2014 period, what with above slippage and sloth, Reg T-3 (3 day settlement of funds, etc.) the IRA gained 3.40%, making it an annualized 6/80%, unless the VIX picks up, and premium returns.
Keep the Faith!
Monday, June 23, 2014
Winner Winner, Chicken Dinner
This past weekend being option expiry (Saturday after the third Friday of each month), another stock was called away in DITM - since the Bull market increased the price of STX (Seagate Tech.) too high to roll out another six months. Of course the appreciation would have been nice, had I just owned the stock, but the comfort of the cushion was pleasant as well.
Also nice to see was the overall profit for this 8-month holding period:
200 shares were bought at $9,636, ITM calls were immediately sold for $1105, and dividend received were $258, for a total profit of $918, including the takeaway amount of $9191 (after all commissions).
That amounts to 14.29% annualized to 12 months, making my 2014 total of 9 completed trades - 12% if annualized from YTD.
Also nice to see was the overall profit for this 8-month holding period:
200 shares were bought at $9,636, ITM calls were immediately sold for $1105, and dividend received were $258, for a total profit of $918, including the takeaway amount of $9191 (after all commissions).
That amounts to 14.29% annualized to 12 months, making my 2014 total of 9 completed trades - 12% if annualized from YTD.
Wednesday, May 28, 2014
Semi Annual Update
Those of you still tracking the DITM strategy, as an alternative to Zero Interest rates (stocks with safety and yield), a pleasant surprise after six months of 2014.
Although the steadily upwards rise, thanks to the Fed ex Machina, has flattened option IV (volatility), which results in the price of the calls, after only 8 closed out trades in 2014 (not including rollouts) the results are in. With only one minor (-$57) loss, the average "annualized" gain was just over 10% - 10.22%.
The last one, today, was a call-away of LO, which jumped so far a rollout was not do-able - too far ITM (in the money) for "extrinsic" premium in the call option. The best measure of volatility - the VIX- is now at a recent record low - sub-12 (11.51), which is a bit worrisome if one looks at the 1-year and 5-year charts of the VIX when it breaks down below 12!
More data at:
Although the steadily upwards rise, thanks to the Fed ex Machina, has flattened option IV (volatility), which results in the price of the calls, after only 8 closed out trades in 2014 (not including rollouts) the results are in. With only one minor (-$57) loss, the average "annualized" gain was just over 10% - 10.22%.
The last one, today, was a call-away of LO, which jumped so far a rollout was not do-able - too far ITM (in the money) for "extrinsic" premium in the call option. The best measure of volatility - the VIX- is now at a recent record low - sub-12 (11.51), which is a bit worrisome if one looks at the 1-year and 5-year charts of the VIX when it breaks down below 12!
More data at:
http://mktsentiment.blogspot.com
Despite a fool's errand of trying to time the market, I'm waiting through the seasonally weak June to enter new positions. Possible candidates could be - CSCO, INTC, KKR, STO, even AAPL7 - which is the 10 share lot of APPLE.
Wednesday, May 21, 2014
LEAP OF FAITH
"Into every life a little rain.....". Or - Why I
like hedging stocks with LEAP options (Longterm Equity AnticiPation) calls and
puts that expire in January of future years - 2105, 2106, etc.
The strategy involves buying a stock of better than average
quality ( A or B in the Schwab rating system), with or without dividend, with a
price usually between $8 and $20; then SELLING a LEAP put and call, out of the
money (called a LEAP Strangle - the same option price would be a Straddle-
using the decay of the option to bring in money to hedge any losses. The
trade-off or liability of selling these options is - the call limits any profit
above the higher OTM (out of the money) "strike" price; the lower OTM
put makes one liable to take on more stock, for which sequestered money must be
set aside - Cash in an IRA, margin from stocks in a taxable account.
Here is an example of a major loss in one of my accounts,
which should be offset with the double-digit returns of successful LEAP trades:
Just Energy was bought in November of 2013 at just under $7
( 1000 shares for $7000 plus commission). It recently tanked from just above $8
to its current $5 level, a $3000 drop, or loss - $2000 from its original price.
However, by selling 10 calls at 7 1/2 for 2016, and 10 puts
at $5, much of this loss was wiped out.
The call was bought back at: $312; it was sold originally
for $1,042 (all commissions included). At the same time the 5-strike put was
sold at $1.55 each - 10 cost $1,533.
Due to time decay of the options , the put can be bought
back at $1.20 ($1,200) for a $333 profit, despite JE's dramatic fall. The stock
can be sold ( a stop loss has been put in at $5.70) for $5700.
So instead of a $2000 loss ($3000 from its top), the numbers
are:
Call: $730
Put: 333
Dividends: 6 times $50 (after foreign taxes): $300
Sold stock: $5700
Actual profit (if JE goes lower and gets stopped out) +$63 -
not bad for a Torpedo!!
As for the total LEAP portfolio in this account (6 stocks
including JE), as of May 1 - six months into the strategy ( excluding NOK,
which was bought a year earlier), it is up 12%, or, if annualized for 12
months, using a 5 month average holding period, 29%.
*****************************************************************
As for MY personal accounts using LEAPS, also stating with
one position in Dec. 2012, adding ladderlike monthly up to over 20 positions
currently, I recently closed out my first and only position - as it turned out,
prematurely - Trina Solar, a rather risky, Chinese company that looked
technically weak, declining fro its recent high of over $18/share to $10! Today
it jumped up over $3.
Still the potential "Loss" was ameliorated by the
LEAPS, as follows:
Bought 500 shares in August of 2013 just under $9 a share
($4500), selling a 10-strike call and a 7-strike put. When TSL jumped from 8 to
18, I tweaked, or fine-tuned it by rolling both the put and call higher and
farther out in time - 2015 to 2016 for more "insurance" money, which
I returned when it dropped to 10.
Bottom line, the numbers went:
Stock cost: $4500, sold at $10.45 for $5215 - net $715
Unfortunately, by buying back both puts and calls after a
downturn, the IV (Implied Volatility - which is the key in deciding what to
sell - or buy back) was so high, I
actually paid more to close out the options - $450- despite the rollup, out and
time decay !! Another negative of TSL is the wide Bid-Ask spread; wise to avoid
in case of buybacks.
So after holding TSL
for 9 months (no dividends) my net profit (no loss) was $260, or 5.8% -
annualized if held 12 months, 7.78% - not bad for a loss - better than MMFunds
or CDs.
In conclusion, what I really like about the LEAP Strangle is
the high reward with a hedged risk, and very little monitoring until the Leap
expires. If the stock then settles lower (or higher) another "Collar"
of Leaps can be put on for another two years.
Thursday, May 15, 2014
Leap Update
Back from vacation - time to update the DITM and LEAP
trades.
On May 15 I closed out the Trina Solar, as it looks weak,
chartwise, plus I'm not big on China
accounting or green/eco stocks with a pending major downturn on the way.
Metrics on TSL (Trina) were as follows:
DEBIT CREDIT
Bought 500 at $8.97 4494
Sold calls -2015 10-strike 1211
Sold puts- 2015 7-strike 937
Rolled Up puts to 10 493
Rolled up Calls-2016 -15 597
Rolled up Puts-2016 -13 1333
Bot Calls to close 1199
Bot Puts to close 2638
Sold stock 5216
TOTAL: 8928 9190
Profit: 262 5.83%
for 9 months, or 7.78% annualized. Not bad for a "loser".
Friday, May 2, 2014
INTO EVERY LIFE...
a little rain must fall!
After 4 good years of DITM earning 11% in my small IRA ( a DITM microcosm), 2013 actually lost a small amount, due to 5 losses on Energy and gold stocks (my bad, not the DITM strategy). With selling covered calls BELOW the buy price (5 to 10%) such losses should be rare in a 5-6 month timeframe, but better Sector Selection would solve that.
So far in 2014, several trades are still ongoing, but the completed trades (4 wins with one $57 loss!) averaged 4.7% YTD, or 14.1% annualized. Tighter stops are required, and the LEAP strategy is doing much better. Although final results won't be in until the Leaps expire in 2015 and 2016, one family account I do them in is up 29% over 5 months average holding period.
After 4 good years of DITM earning 11% in my small IRA ( a DITM microcosm), 2013 actually lost a small amount, due to 5 losses on Energy and gold stocks (my bad, not the DITM strategy). With selling covered calls BELOW the buy price (5 to 10%) such losses should be rare in a 5-6 month timeframe, but better Sector Selection would solve that.
So far in 2014, several trades are still ongoing, but the completed trades (4 wins with one $57 loss!) averaged 4.7% YTD, or 14.1% annualized. Tighter stops are required, and the LEAP strategy is doing much better. Although final results won't be in until the Leaps expire in 2015 and 2016, one family account I do them in is up 29% over 5 months average holding period.
Wednesday, February 26, 2014
LEAP RESULTS
As I mentioned in my talk before the San Francisco Bay Area Options Group last weekend, my Leap Strangle (see Older Posts) has taken precedence over DITM for the time being, at least until Volatility (i.e., IV) widens. In my talk I showed a table of my family portfolio of Leaps that had a paper (marked to market) return of about 7% for basically four months.
As this Bull market marches onward into its sixth year, I've become more concerned with safety, although, as the results of my personal Leap portfolio show, not only is the safety cushion much wider, but so is the Reward! As explained earlier, the "Cushion" is the money brought in by selling both Leap calls (covered) and puts for a goodly portion of the purchase price of the stock.
Not only do I want to ladder the expiry date of these Strangles (2015, 2106, 2017), but my entry has been almost monthly from just over a year ago; of the 20 different positions I hold, 10 were entered in the last quarter of 2013, four this year.
Adding up the current (paper) profit, of the $81,449 invested in stock, the walkaway profit (if positions were closed out), including dividends, is $19,173 - dividends are $2868 of this total. Despite the sliding scale of entry time, the profit is 23.54%!
Full disclosure - if the trades are done in an IRA, or non-margin account, the result will be less, as one has to include in the cost basis the sequester of funds to buy (if necessary) the stock "put" to one if the stock drops and REMAINS below the put strike price at expiry. 12 of the stocks have an 2015 expiry; a few were rolled up (down) and out to 2016 - 2017 won't be available until October of this year.
As this Bull market marches onward into its sixth year, I've become more concerned with safety, although, as the results of my personal Leap portfolio show, not only is the safety cushion much wider, but so is the Reward! As explained earlier, the "Cushion" is the money brought in by selling both Leap calls (covered) and puts for a goodly portion of the purchase price of the stock.
Not only do I want to ladder the expiry date of these Strangles (2015, 2106, 2017), but my entry has been almost monthly from just over a year ago; of the 20 different positions I hold, 10 were entered in the last quarter of 2013, four this year.
Adding up the current (paper) profit, of the $81,449 invested in stock, the walkaway profit (if positions were closed out), including dividends, is $19,173 - dividends are $2868 of this total. Despite the sliding scale of entry time, the profit is 23.54%!
Full disclosure - if the trades are done in an IRA, or non-margin account, the result will be less, as one has to include in the cost basis the sequester of funds to buy (if necessary) the stock "put" to one if the stock drops and REMAINS below the put strike price at expiry. 12 of the stocks have an 2015 expiry; a few were rolled up (down) and out to 2016 - 2017 won't be available until October of this year.
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