From: Christopher Smith <chris@theoptionclub
To: OptionClub@yahoogro
Sent: Saturday, June 20, 2009 7:20:56 PM
Subject: Re: [TheOptionClub.
Bob,
You encountered exactly what I was eluding to in my last post. Something to remember about the covered call strategy is that it is a bullish strategy. The "Super Put", or synthetic call calendar spread, is a range bound strategy. So, you'll lose money on these in a trending market, just like you have experienced.
Now you're selling naked puts to enhance your premium collection. This is not considered a calendar or a diagonal spread. A calendar / diagonal is what you have with your "Super Put" position. What you get when you sell the extra put is a put ratio spread.
Here's the rub. You added the long put to your covered call to reduce your risk. By selling naked puts you've expanded your risk considerably. Question whether you're opening up a can of worms here and whether this is the position you want in your account should this market roll over on us.
Remember that risk management is what separates the winners from the losers...
Christopher Smith
TheOptionClub. com
--- In OptionClub@yahoogro ups.com, Bob C <bobc0923@...> wrote:
>
> Hi Jeff - Your video is great! And I have to thank you for your other video on using Interactive Brokers for CCs also. I relied on it very much as I just happened to have opened my IB account around the same time as you did your video...it made my first couple of CC trades very easy to do.
>
> So here is my own experience with SuperPuts (Collars). I did 7 of them back in February on stocks that I planned on holding long term but still wanted to get some cc premium from along the way (and to help pay for the cost of the puts). My strategy was very similar to yours with buying the Put just about ATM or slightly OTM, depending on the stock I was buying into. Given the overall market sentiment back in February who knew where we were headed. So I! felt sa fer having the put protection on...and for about a month or so it was all good. Then the market bottomed in March, took off and hasn't looked back...yet. The value on my puts are down SIGNIFICANTLY, over 50% today, because of the huge run-up in those stocks. I knew the value would drop with an increase in stock price but I never thought by this much. Overall, the drop in the value of these puts has not yet been offset by the increased value in the covered calls on these 7
> positions. That would be my error in not selling calls far enough OTM but I never expected the huge rally we've had. I have seen the drop in value level off some though now. I guess because these puts are now pretty far OTM. The problem I am in now is that I have had to roll out my covered calls several months (some more than 3 months) to avoid taking a debit on the roll out, again because of the strong run-up from March. So the cc premium I was thinking I would produce each month (to help offset some of the put cost) has been reduced a lot since I am so deep ITM on some of these calls.
>
> To offset this situation some I have taken to doing some short term naked puts on these 7 positions to help recover some premium (and I guess those superputs are now considered calendar or diagonal spreads instead since I have some short puts in place also).
>
> Anyway, just my observation on my superput/collar trades I have in place. Luckily I only did one contract on each and at the time I decided it would be a good learning experience. And I'm only underwater if I sell these positions now and I'm not planning on that (my cost basis is just higher still). I'm not complaining about the superput/collar strategy...maybe my timing was just bad luck. I'm just in maintenance/ repair mode on these positions now in a different way than I was planning. But that also is the beauty of options...so many options! I will continue ! to hold these positions and write my calls as the months come up. I guess my overall returns will not be as much as I had originally calculated them to be. Of course, if the market should drop some, either retrace some or re-test March lows I will secretly be a little happy for these 7 positions of mine :)
>
> I will be very interested in following your SID trade to see how it plays out. Sorry this response is so long, I hope it makes some sense. Thanks again for taking your time to produce your videos too! - Bob
>
>
>
>
> ____________ _________ _________ __
> From: jeff_williamsen jeff@...
> To: OptionClub@yahoogro ups.com
> Sent: Thursday, June 18, 2009 7:58:28 PM
> Subject: [TheOptionClub. com] SuperPut - SID
>
>
>
>
>
> I have not posted hardly at all in this group since I spend most of my time int he Just Covered Calls group. But they don't want me to talk, discuss or even mention SuperPuts in that group.
>
> A SuperPut is a Covered Call with a long-term protective put. The idea is to use the Put as protection and continue to write Covered Calls against the underlying until the time is right to exit - depending on many factors.
>
> The term SuperPut is a trademark of the CallWriter service and web site. I am an avid subscriber to that service and I have been studying SuperPuts for a few months now. I decided to open on in my demo account at Interactive Brokers and test the concept in this undecided market.
>
> I make a lot of demonstration videos and I made on entering a SuperPut on SID today using TWS Option Trader. You can catch the video at YouTube (http://www. youtube. com/watch? v=itVVh8- -4Eo) or on my blog at http://buywrite. wordpress. com (it may take a few hours to get it posted on my blog).
>
> I plan to keep producing videos on this trade as I make adjustments and finally exit in th! e future .
>
> Comments and inputs are welcome.
>
> Jeff W.
>
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