Sunday, February 28, 2010

Re: [TheOptionClub.com] Why Did I Lose $$$?

 

two comments.  first you may have been hurt by trading too small.  it's possible commissions were too large relative to the number of contracts.  two, why roll to the 65 strike instead of 70?  the higher strike may have given more breathing room, though you would have to check if the prices there would have made the trade profitable.  Also there are many other adjustments to a calendar than only rolling up the short leg.

From: RobertH <robhansen5252@hotmail.com>
To: OptionClub@yahoogroups.com
Sent: Sun, February 28, 2010 11:49:55 PM
Subject: [TheOptionClub.com] Why Did I Lose $$$?

 

I've been trying sooo hard to learn calendars, and have gravitated to Dan Sheridan's method of calendar adjustment. I opened a position in McDonalds on the last day of December with the stock at $62.44, buying 12 of the Mar 62.5c and selling the Feb 62.5c for a debit of 0.26. When the stock hit my upper break even point on Feb 3rd, I peeled off half of the 62.5 positions for a credit of 0.21, and initiated a new 6 call contract position at the 65 strike which cost me 0.49. So now I have a double calendar, all calls, at 62.5 and 65. The profit loss graph looks like a boy scout tent with very little sagging in the middle. Well, I couldn't get out of the trade with a profit all the way to the day before February expiration even though the stock was safely between my strikes. Also, my profit loss graph (at expiration) still looked good. I exited the trade on February 18, closing the 62.5 spread at 0.31 and the 65 spread at 0.54.
On paper, I was ahead $30.00 after all that trading, but factor in commissions and I lost $78.84. What am I overlooking here? This should have been a slam dunk. From what I see, I should have let the short Feb 65 call expire worthless while the March 65 call shot up from 0.60 to close the week at 0.72. (Didn't know that in advance, though). But I didn't think anyone holds calendars all the way to expiration.
Anyone with calendar experience care to take a look at this one. I am obsessed with calendars and need some tips.

Thanks,
RFH


__._,_.___
The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading.  All messages and postings, and any materials circulated are provided for discussion and educational purposes only.  No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice.  All investors are encouraged to consult a qualified professional before trading in any security.  Stock and option trading involves risk and is not suitable for most people.  There is no guarantee that any information provided is accurate and, may in fact, be wrong.  It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student.  As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source.

To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
.

__,_._,___
Posted by at No comments:

[TheOptionClub.com] Why Did I Lose $$$?

 

I've been trying sooo hard to learn calendars, and have gravitated to Dan Sheridan's method of calendar adjustment. I opened a position in McDonalds on the last day of December with the stock at $62.44, buying 12 of the Mar 62.5c and selling the Feb 62.5c for a debit of 0.26. When the stock hit my upper break even point on Feb 3rd, I peeled off half of the 62.5 positions for a credit of 0.21, and initiated a new 6 call contract position at the 65 strike which cost me 0.49. So now I have a double calendar, all calls, at 62.5 and 65. The profit loss graph looks like a boy scout tent with very little sagging in the middle. Well, I couldn't get out of the trade with a profit all the way to the day before February expiration even though the stock was safely between my strikes. Also, my profit loss graph (at expiration) still looked good. I exited the trade on February 18, closing the 62.5 spread at 0.31 and the 65 spread at 0.54.
On paper, I was ahead $30.00 after all that trading, but factor in commissions and I lost $78.84. What am I overlooking here? This should have been a slam dunk. From what I see, I should have let the short Feb 65 call expire worthless while the March 65 call shot up from 0.60 to close the week at 0.72. (Didn't know that in advance, though). But I didn't think anyone holds calendars all the way to expiration.
Anyone with calendar experience care to take a look at this one. I am obsessed with calendars and need some tips.

Thanks,
RFH

__._,_.___
The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading.  All messages and postings, and any materials circulated are provided for discussion and educational purposes only.  No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice.  All investors are encouraged to consult a qualified professional before trading in any security.  Stock and option trading involves risk and is not suitable for most people.  There is no guarantee that any information provided is accurate and, may in fact, be wrong.  It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student.  As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source.

To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
.

__,_._,___
Posted by at No comments:

Re: [ConservativeOptionStrategies] Re: Covered calls with collars

 

Thank you!



-----Original Message-----
From: Kenneth Ginsberg <ken_ginsberg@yahoo.com>
To: ConservativeOptionStrategies@yahoogroups.com
Sent: Sun, Feb 28, 2010 3:37 pm
Subject: RE: [ConservativeOptionStrategies] Re: Covered calls with collars

 
It is in the Files section of this group. Named "Diagonal Leap Spread Portfolio Strategy.doc" dated 8/16/2008. There are also a few accompanying documents and spreadsheets that Dr.Joe has loaded there as well which also help to provide additional insights and understanding of the strategy.
 
Ken
 
 
From: ConservativeOptionStrategies@yahoogroups.com [mailto:ConservativeOptionStrategies@yahoogroups.com] On Behalf Of zmostatabi@aol.com
Sent: Sunday, February 28, 2010 1:32 PM
To: ConservativeOptionStrategies@yahoogroups.com
Subject: Re: [ConservativeOptionStrategies] Re: Covered calls with collars
 
 
Where is this paper so it can be read as educational matter as recommended by drj.
 

 
I assume you have read Dr.Joes paper and understand the philosophy behind what I have just explained, if not, I recommend reading through it (it took me quite a few read thrus to "get it").
 
 
-----Original Message-----
From: Kenneth Ginsberg <ken_ginsberg@yahoo.com>
To: ConservativeOptionStrategies@yahoogroups.com
Sent: Sun, Feb 28, 2010 7:58 am
Subject: RE: [ConservativeOptionStrategies] Re: Covered calls with collars
 
Jeff:
 
It is important to keep in mind that this strategy (DLS) is designed as an income strategy and not truly a capital gains strategy (although capital gains are absolutely a part of the overall income strategy).
 
That being said, if you define "losing months" as a month where the premiums from expired short calls did not equal the unrealized losses on the long DITM leaps, then yes, there were definitely months that were losers by that definition, however, I still generated the income from the short calls, and took the opportunity as the market was falling to buy more Leap calls to sell near month calls against. As the market rose again, the gain in value of the LEAP calls (some of which get sold per the DLS strategy as markets rise) substantially outweighed the cost of buying back the now ITM short calls that had been sold. I assume you have read Dr.Joes paper and understand the philosophy behind what I have just explained, if not, I recommend reading through it (it took me quite a few read thrus to "get it").
 
In my opinion, these past 2 years or so have validated the strategy laid out in the DLS paper. I got in before the total crash, rode through it using the strategies outlined, and on the subsequent rise, again followed the "rules" and have been very pleased with the results. This leads me to try to answer the first part of your question; as to monthly returns, in all honesty, they will vary depending on which market cycle you are in, and how you define "monthly returns". I have taken out anywhere from no less than 2% a month in income to some months where I have seen 5% or more (during the volatility explosion especially).
 
Some will argue that you need to look at your "net portfolio value" to figure out the monthly returns, and in many areas of my investing and trading that is exactly what I do, but for the money set aside for this strategy, unless you are of the firm commitment that the markets will crash, and NEVER come back, then this strategy, in my mind, is one that should be evaluated by the guidelines Dr.Joe has set out in his paper.
 
I hope I have answered your question adequately, but feel free to ask for any more specificity if you like.
 
Ken
 
 
 
From: ConservativeOptionStrategies@yahoogroups.com [mailto:ConservativeOptionStrategies@yahoogroups.com] On Behalf Of Jeff
Sent: Saturday, February 27, 2010 7:29 PM
To: ConservativeOptionStrategies@yahoogroups.com
Subject: RE: [ConservativeOptionStrategies] Re: Covered calls with collars
 
 
Ken,
 
What is a reasonable monthly return using this strategy?  Do you experience any losing months?
 
Thanks.
 
Jeff
 
From: ConservativeOptionStrategies@yahoogroups.com [mailto:ConservativeOptionStrategies@yahoogroups.com] On Behalf Of Kenneth Ginsberg
Sent: Saturday, February 27, 2010 4:05 PM
To: ConservativeOptionStrategies@yahoogroups.com
Subject: RE: [ConservativeOptionStrategies] Re: Covered calls with collars
 
 
Jeff:
 
DrJoes DLS strategy that I have been trading  is his DITM Leap Call Strategy vs. Monthly Short Calls as detailed in his paper in the files section. I have not used his Leap DITM  Put strategy, although after reading his paper and some of his posts here I will be spending some time studying it and possibly implementing it at some time in the near future if I find I understand it as well as I do his DLS strategy.
 
Ken
 
 
From: ConservativeOptionStrategies@yahoogroups.com [mailto:ConservativeOptionStrategies@yahoogroups.com] On Behalf Of srj3inc
Sent: Saturday, February 27, 2010 3:40 PM
To: ConservativeOptionStrategies@yahoogroups.com
Subject: [ConservativeOptionStrategies] Re: Covered calls with collars
 
 


--- In ConservativeOptionStrategies@yahoogroups.com, Kenneth Ginsberg <ken_ginsberg@...> wrote:
>
> Jeff:
>
> Let me just say I have been trading DrJoes DLS strategy since ...

------------------
Ken,

Great to know that DLS is working for you.

Can you pl. update us if you are trading the LEAP strategy or selling short term PUT against the DITM LEAP PUT strategy?

Thanks,

__._,_.___
.

__,_._,___
Posted by at No comments:

RE: [TheOptionClub.com] Money Management

 

I don't know if my last one got through. Is this a modified Kelly? If not what is "A" (I'm assuming  "p" is probability of profit or historic proportion of winners but A as average net win doesn't make sense).

 

From: OptionClub@yahoogroups.com [mailto:OptionClub@yahoogroups.com] On Behalf Of Migo1
Sent: Sunday, February 28, 2010 7:01 AM
To: OptionClub@yahoogroups.com
Subject: [TheOptionClub.com] Money Management

 




F = [ {(A + 1) X p}-1 ] / A

If you don't know what this is, stop trading, and don't start until you have read "A trader's Money Management System by Bennet A. McDowell.

If you are a product of our less than mediocre public education and are intimidated by this formula, don't worry it is simple, however if you cant understand it, you should permanently stop trading.

So what is your expectancy ?

 

From: anatolemclubs <anatolemclubs@yahoo.com>
To: OptionClub@yahoogroups.com
Sent: Sat, February 27, 2010 10:10:02 PM
Subject: Re: [TheOptionClub.com] terry's tips

 

100% agree with Jack about money management. Terry's portfolios are 100% invested in leveraged instruments with no cash cushion in case something goes the wrong way. Many of his portfolios have gone to 0 or 10% of their original value. Then he closes them and comes up with new ones.

Also Terry has been accused of fraud by the sec?:

http://www.sec. gov/litigation/ litreleases/ 2006/lr19725. htm

--- In OptionClub@yahoogro ups.com, "jackcrawford72" <jack@...> wrote:
>
>
> Trading is 70% Money Management, 20% System, 5% avoiding emotion, 5%
> dumb luck :-) so if you don't get the 70% part right then you don't
> have a chance making it long term.
>
> Joey,
> Would you care to share your Money Management rules? It seems like you
> have been doing this for quite a few years and probably have some good
> advice. Maybe a good reference.
>
> Thanks, Jack
>
>
> --- In OptionClub@yahoogro ups.com, Joey Huckabee <trading.ocyg@ >
> wrote:
> >
> > I paid for Terry's tips around 2000-2003 before the "mighty mesa
> strategy" was
> > "invented" and can say that Terry's program is a very poor example of
> trade
> > management. He claims to have years of experience but back then
> he certainly
> > did not convey very much of the experience that I would expect to
> see. Over the
> > last nine years that I have been studying the art of trading I believe
> that I
> > have come to the appropriate conclusions that brought me to this group
> in the
> > first place. Trading is 70% Money Management, 20% System, 5%
> avoiding emotion,
> > 5% dumb luck :-)Â so if you don't get the 70% part right then you
> don't have a
> > chance making it long term. Â
> > Â
> > With Terry's Tips I monitored his 10K strategy for 3 years and watched
> as
> > members lost there entire $10,000 balance for three straight years
> simply
> > because the 10K system did not provide any stop loss and frequently
> took 100%
> > losses on positions that were put on and even "doubled down" at times
> that ended
> > up worse than if you just stuck with the initial capital invested.Â
> The only
> > reason I post these disparaging remarks is because the time period
> that I
> > monitored his trades was a very volatile time, not unlike what we are
> in now,
> > which caused his indicators to change directions then get
> whipsawed. He went
> > through a period of giving out free memberships to existing members
> because of
> > the extreme losses (I received two years free).
> > Â
> > No as for the "mighty mesa strategy" if I remember correctly it was
> just a bunch
> > of calendar spreads (or double diagonals) that required a huge amount
> of capital
> > locked up in a single trade which would expose those of us with small
> bank rolls
> > to enormous amount of risk. So unless that has changed I would
> say that Terry
> > is still consistently breaking even or losing money and making money
> with his
> > advisory service.
> > Â
> > On a side note - everyone that posted "if you could make a ton of
> money through
> > an advisory service then wall street would be in trouble" it really
> does ring
> > true.
> > Â
> > Joey
> >
> >
> >
> >
> > On February 26, 2010 at 7:18 AM Alexander S alexstjo@ wrote:
> >
> >
> > > Â
> > >
> > >
> > > Hi,
> > >
> > > I was wondering if anyone is using terrystips.com mighty mesa
> strategy
> > >
> > >
> >
>




__._,_.___
The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading.  All messages and postings, and any materials circulated are provided for discussion and educational purposes only.  No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice.  All investors are encouraged to consult a qualified professional before trading in any security.  Stock and option trading involves risk and is not suitable for most people.  There is no guarantee that any information provided is accurate and, may in fact, be wrong.  It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student.  As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source.

To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
.

__,_._,___
Posted by at No comments:

Re: [TheOptionClub.com] Money Management

 

I guess I'm a victim of mediocre public education. I've yet to see a
formula in any text book where the variables aren't defined. Maybe you
could enlighten us? I'm particularly interested in what function [] and
{} represent.

Migo1 wrote:
>
>
> F = [ {(A + 1) X p}-1 ] / A
>
> If you don't know what this is, stop trading, and don't start until you
> have read "A trader's Money Management System by Bennet A. McDowell.
>
> If you are a product of our less than mediocre public education and are
> intimidated by this formula, don't worry it is simple, however if you
> cant understand it, you should permanently stop trading.
>
> So what is your expectancy ?
>
>
> ----------------------------------------------------------
> *From:* anatolemclubs <anatolemclubs@yahoo.com>
> *To:* OptionClub@yahoogroups.com
> *Sent:* Sat, February 27, 2010 10:10:02 PM
> *Subject:* Re: [TheOptionClub.com] terry's tips
>
>
>
> 100% agree with Jack about money management. Terry's portfolios are 100%
> invested in leveraged instruments with no cash cushion in case something
> goes the wrong way. Many of his portfolios have gone to 0 or 10% of
> their original value. Then he closes them and comes up with new ones.
>
> Also Terry has been accused of fraud by the sec?:
>
> http://www.sec. gov/litigation/ litreleases/ 2006/lr19725. htm
> <http://www.sec.gov/litigation/litreleases/2006/lr19725.htm>
>
> --- In OptionClub@yahoogro ups.com
> <mailto:OptionClub%40yahoogroups.com>, "jackcrawford72" <jack@...> wrote:
> >
> >
> > Trading is 70% Money Management, 20% System, 5% avoiding emotion, 5%
> > dumb luck :-) so if you don't get the 70% part right then you don't
> > have a chance making it long term.
> >
> > Joey,
> > Would you care to share your Money Management rules? It seems like you
> > have been doing this for quite a few years and probably have some good
> > advice. Maybe a good reference.
> >
> > Thanks, Jack
> >
> >
> > --- In OptionClub@yahoogro ups.com
> <mailto:OptionClub%40yahoogroups.com>, Joey Huckabee <trading.ocyg@ >
> > wrote:
> > >
> > > I paid for Terry's tips around 2000-2003 before the "mighty mesa
> > strategy" was
> > > "invented" and can say that Terry's program is a very poor example of
> > trade
> > > management. He claims to have years of experience but back then
> > he certainly
> > > did not convey very much of the experience that I would expect to
> > see. Over the
> > > last nine years that I have been studying the art of trading I believe
> > that I
> > > have come to the appropriate conclusions that brought me to this group
> > in the
> > > first place. Trading is 70% Money Management, 20% System, 5%
> > avoiding emotion,
> > > 5% dumb luck :-)Â so if you don't get the 70% part right then you
> > don't have a
> > > chance making it long term. Â
> > > Â
> > > With Terry's Tips I monitored his 10K strategy for 3 years and watched
> > as
> > > members lost there entire $10,000 balance for three straight years
> > simply
> > > because the 10K system did not provide any stop loss and frequently
> > took 100%
> > > losses on positions that were put on and even "doubled down" at times
> > that ended
> > > up worse than if you just stuck with the initial capital invested.Â
> > The only
> > > reason I post these disparaging remarks is because the time period
> > that I
> > > monitored his trades was a very volatile time, not unlike what we are
> > in now,
> > > which caused his indicators to change directions then get
> > whipsawed. He went
> > > through a period of giving out free memberships to existing members
> > because of
> > > the extreme losses (I received two years free).
> > > Â
> > > No as for the "mighty mesa strategy" if I remember correctly it was
> > just a bunch
> > > of calendar spreads (or double diagonals) that required a huge amount
> > of capital
> > > locked up in a single trade which would expose those of us with small
> > bank rolls
> > > to enormous amount of risk. So unless that has changed I would
> > say that Terry
> > > is still consistently breaking even or losing money and making money
> > with his
> > > advisory service.
> > > Â
> > > On a side note - everyone that posted "if you could make a ton of
> > money through
> > > an advisory service then wall street would be in trouble" it really
> > does ring
> > > true.
> > > Â
> > > Joey
> > >
> > >
> > >
> > >
> > > On February 26, 2010 at 7:18 AM Alexander S alexstjo@ wrote:
> > >
> > >
> > > > Â
> > > >
> > > >
> > > > Hi,
> > > >
> > > > I was wondering if anyone is using terrystips.com
> <http://terrystips.com> mighty mesa
> > strategy
> > > >
> > > >
> > >
> >
>
>
>
>

__._,_.___
The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading.  All messages and postings, and any materials circulated are provided for discussion and educational purposes only.  No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice.  All investors are encouraged to consult a qualified professional before trading in any security.  Stock and option trading involves risk and is not suitable for most people.  There is no guarantee that any information provided is accurate and, may in fact, be wrong.  It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student.  As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source.

To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
.

__,_._,___
Posted by at No comments:

[TheOptionClub.com] Re: Option Club videos and strategy..Views?

 

The videos you referenced were produced by David Vallieres. I licensed
the core video course because I thought they provided good insight into
monthly income trading strategies. The primary focus in those videos
were upon iron condors and double diagonal spreads.

Over the last ten months since opening the Trading Room, I have been
steadily adding materials. In addition to the materials presented by
Mr. Vallieres, we now have extensive new materials on position
adjustments, iron condors, calendar spreads, trade management and
planning, and more. The Vallieres materials are also schedule to be
replaced with new materials.

The positions do tend to be theta positive. Many are non-directional,
but there are also a number that allow for a directional bias. If you
have additional questions, feel free to ask.

Christopher Smith
TheOptionClub.com

--- In OptionClub@yahoogroups.com, weskyleo <weskyleo@...> wrote:
>
> Folks,
>
> Somehow I ran into the theoptionclub.com when signing up for a seminar
.
> Initially it was the free 8 videos and then just as one would expect
few
> more sets for a subscription fee...Saw the first video and it kept
rambling
> about how great it is and how safe and how much money you could make
without
> saying a word about what position/strategy they do . I've been trading
> options for a while and I know that there's no guaranteed way to make
> supernormal returns anywhere ...NO RISK NO RETURN (just treasury) ....
> you get the point.
> Question : Has anyone tried these videos/strategies ? Are they worth
it? Or
> just another one of those money making schemes that tells you what you
want
> to hear???
> BTW, what strategies do they put on? Sounded like decay maximizes at
> exp....or similar
>
> Appreciate all comments.
>
> Thanks
>

__._,_.___
The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading.  All messages and postings, and any materials circulated are provided for discussion and educational purposes only.  No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice.  All investors are encouraged to consult a qualified professional before trading in any security.  Stock and option trading involves risk and is not suitable for most people.  There is no guarantee that any information provided is accurate and, may in fact, be wrong.  It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student.  As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source.

To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
.

__,_._,___
Posted by at No comments:

Re: [TheOptionClub.com] Some clarification on 1256 tax treatment

 

Jeanine,

Great summary.

Can expenses related to training, mentoring, books, data feeds and other similar costs be deducted by non professional or someone who's primary income is not from trading?

Thanks



From: Jeannie <texasgig@gmail.com>
To: OptionClub@yahoogroups.com
Sent: Sun, February 28, 2010 1:12:15 AM
Subject: Re: [TheOptionClub.com] Some clarification on 1256 tax treatment

 

Thanks for everyone's input so far into the topic of taxes and trader status.  I've done some further reading on this via the recommended web sites, and I've summarized the key issues below.  But I still have some questions, too... please answer if you know:

  • A person who wants to write-off trading-related expenses does it via one of 3 ways:
    • As an individual (regular 1040) in early business formation, via Sched-C (high risk of audit!!)
    • Establish trader status... requirements are cloudy! (high risk of audit!!)
      • Doesn't avoid the Sched-D1
      • For Options when we "leg out": each sale is counted separately??
    • Form an entity (low audit risk, but costs $ and figuring out the best type is another issue!)
  • Mark-to-market (MTM) is optional and can be elected by traders or entities, but not by individuals (i.e. investors)
    • It is irrevocable and thus best done via a separate entity/account, which can be shut down if desired later
    • Losses can be carried back up to 5 years
      • Someone wrote that they can be taken against past ORDINARY income, such as from a job, but GreenTaxTrader wrote that they can only offset past gains... So which is it??
      • If loss carrybacks really CAN offset past income from a job, can this still occur if the MTM is elected only for the separate entity (which has no income or gain yet)??  If so, how does that happen, via "flow-through" accounting from the entity back onto the individual's 1040?
    • Losses can be carried forward for __ years
      • Same question... against income or only against capital gains?
      • If against income is allowed, how about against a Rollover->Roth conversion this year?
  • Tax treatment of 1256 contracts
    • Includes futures, index options, forex, and maybe ETF options
    • Is allowed for ALL types of tax filings (individual, traders, entities)?
    • But is not allowed if MTM is elected... this poses a real dilemma for a person/entity who trades both equities and futures/index options, so would a person need to form separate entities trading each??
Thanks in advance for any insights!

On Wed, Feb 3, 2010 at 7:00 PM, Peter Nolan <pnolan_sd@yahoo. com> wrote:
 

There is no requirement to mart to market. It is an election to mark to market.

--- On Wed, 2/3/10, Kenneth Ginsberg <ken_ginsberg@ yahoo.com> wrote:

From: Kenneth Ginsberg <ken_ginsberg@ yahoo.com>
Subject: RE: [TheOptionClub. com] Some clarification on 1256 tax treatment
To: OptionClub@yahoogro ups.com
Date: Wednesday, February 3, 2010, 3:20 PM


 

It is my understanding (and I am not an accountant, so my suggestion is to check with one that is familiar with this area of the tax codes) that if you have elected (and the IRS does not challenge) trader status, you would never have a 1256 issue, because all transactions are considered inventory moving in and out of your trading accounts on a short term basis, they are marked to market at year end as if you sold them on 12/31 and a new cost basis is started, and there is no long/short capital gains issues. The real benefit is you will no longer be subject to the maximum $3000 year loss writeoff on your income taxes each year, if you lose 25,000 this year then $25,000 is your loss. It becomes a schedule C (business)  issue not a schedule D (investments) issue and nowhere on schedule C will short/long term capital gains be considered.

 

As I said, check with a reliable knowledgeable accountant, but for some people even if they qualify for trader status, depending on what type of trading they do, they may be better off without it.

 

Also, note, that you can elect trader status for the actual trading business you run, and that can be separate and apart from any personal "investments" you have which would continue to show up on your schedule D. In other words, you can have both trading accounts and investment accounts. As in any business you need to have a real wall between your "business" (trading) and your personal investments.

 

Hope this helps.

 

Ken

 

 

From: OptionClub@yahoogro ups.com [mailto:OptionClub@ yahoogroups. com] On Behalf Of iwtlib@yahoo. com


Sent: Tuesday, February 02, 2010 11:31 PM
To: OptionClub@yahoogro ups.com

Subject: Re: [TheOptionClub. com] Some clarification on 1256 tax treatment

 

 

It applies to all filers claiming capital gains.  It's easy to do and well worth the little extra effort.

 

From: Jeannie <texasgig@gmail. com>
To: OptionClub@yahoogro ups.com


Sent: Tue, February 2, 2010 8:32:43 PM
Subject: Re: [TheOptionClub. com] Some clarification on 1256 tax treatment

 

Hi,

Thanks for the info.  Does this apply to all tax filers, or only those under trader status?

Does anyone have thoughts on switching to trader status, by the way (pros/cons)?  I'd guess that mark-to-market reduces hassle of record-keeping, and one also gets to write-off expenses, correct?  But are there drawbacks?

I'm wondering how to establish trader status -- whether there are certain trade activity minimums, and whether it requires an accountant or lawyer initially, and how much that would cost.

Thanks!

On Mon, Feb 1, 2010 at 7:06 PM, nahorowitz <nhorowitz@axeus. com> wrote:

 

Some clarification on 1256 tax treatment. There are some grey areas in the law regarding 1256 treatment. For those of you who don't know about 1256, it is IRS rule that gives 60% long term/40% short term tax treatment to broad-based index options, so this is a big tax-saver for folks who collect premium and would otherwise be taxed 100% short term rate.

All broad-based cash settled index options for sure get 1256 tax treatment. So this includes all index options, as well as any other obscure cash settled options. They must meet the definition of "Broad-based" which basically means 10 or more constituents. Narrow-based indexes (9 constituents or less) do not qualify.

Now the grey area in the law has to do with options on ETFs that mirror broad-based indexes. So does SPY qualify for 1256 treatment? Several of the CPAs who are expert in trader taxation (e.g., Robert Green of GreenTraderTax. com) take the position that options on broad-based index ETFs DO qualify for 1256 treatment. But there is no law or IRS ruling or case law directly on this point, but there are some strong arguments in favor of this position.

One of the tax matching software programs called GainsKeeper keeps an up-to-date list of ETFs that they believe qualify for 1256 treatment of their options. I know that SPY and UNG are on their list. The product manager told me that the IRS uses Gainskeeper on their side, so if your ETF symbol is on Gainskeeper' s list you may be quite safe since the IRS will be checking that same list on their side.

Now that ThinkOrSwim has merged with Ameritrade and Ameritrade was a Gainskeep client, TOS now offers Gainskeeper Gain/Loss reports on the TOS website. Several other brokers also offer Gainskeeper reports for free. If the GainsKeeper reports says "Mixed" in the holding period column, then those are the symbols that they say qualify for 1256 treatment. I know SPY and UNG, which are both broad based index ETFs, have my options trades showing "mixed" on my Gainskeeper report.

 

 



__._,_.___
The goal of TheOptionClub is to provide a forum for members to work together for the purpose of furthering our individual understanding option trading.  All messages and postings, and any materials circulated are provided for discussion and educational purposes only.  No statement contained in any materials from TheOptionClub should be considered a recommendation to buy or sell a security or to provide investment, legal or tax advice.  All investors are encouraged to consult a qualified professional before trading in any security.  Stock and option trading involves risk and is not suitable for most people.  There is no guarantee that any information provided is accurate and, may in fact, be wrong.  It is understood that the participants in TheOptionClub have varying backgrounds and degrees of experience in option trading, and that regardless of experience each member is considered a student.  As such, any information distributed through TheOptionClub should be considered with a critical mind and not relied upon as an authoritative source.

To unsubscribe from TheOptionClub, send an email to:
OptionClub-unsubscribe@yahoogroups.com
.

__,_._,___
Posted by at No comments:

RE: [ConservativeOptionStrategies] Re: Covered calls with collars

 

It is in the Files section of this group. Named "Diagonal Leap Spread Portfolio Strategy.doc" dated 8/16/2008. There are also a few accompanying documents and spreadsheets that Dr.Joe has loaded there as well which also help to provide additional insights and understanding of the strategy.

 

Ken

 

 

From: ConservativeOptionStrategies@yahoogroups.com [mailto:ConservativeOptionStrategies@yahoogroups.com] On Behalf Of zmostatabi@aol.com
Sent: Sunday, February 28, 2010 1:32 PM
To: ConservativeOptionStrategies@yahoogroups.com
Subject: Re: [ConservativeOptionStrategies] Re: Covered calls with collars

 

 

Where is this paper so it can be read as educational matter as recommended by drj.

 


 

I assume you have read Dr.Joes paper and understand the philosophy behind what I have just explained, if not, I recommend reading through it (it took me quite a few read thrus to "get it").

 

 

-----Original Message-----
From: Kenneth Ginsberg <ken_ginsberg@yahoo.com>
To: ConservativeOptionStrategies@yahoogroups.com
Sent: Sun, Feb 28, 2010 7:58 am
Subject: RE: [ConservativeOptionStrategies] Re: Covered calls with collars

 

Jeff:

 

It is important to keep in mind that this strategy (DLS) is designed as an income strategy and not truly a capital gains strategy (although capital gains are absolutely a part of the overall income strategy).

 

That being said, if you define "losing months" as a month where the premiums from expired short calls did not equal the unrealized losses on the long DITM leaps, then yes, there were definitely months that were losers by that definition, however, I still generated the income from the short calls, and took the opportunity as the market was falling to buy more Leap calls to sell near month calls against. As the market rose again, the gain in value of the LEAP calls (some of which get sold per the DLS strategy as markets rise) substantially outweighed the cost of buying back the now ITM short calls that had been sold. I assume you have read Dr.Joes paper and understand the philosophy behind what I have just explained, if not, I recommend reading through it (it took me quite a few read thrus to "get it").

 

In my opinion, these past 2 years or so have validated the strategy laid out in the DLS paper. I got in before the total crash, rode through it using the strategies outlined, and on the subsequent rise, again followed the "rules" and have been very pleased with the results. This leads me to try to answer the first part of your question; as to monthly returns, in all honesty, they will vary depending on which market cycle you are in, and how you define "monthly returns". I have taken out anywhere from no less than 2% a month in income to some months where I have seen 5% or more (during the volatility explosion especially).

 

Some will argue that you need to look at your "net portfolio value" to figure out the monthly returns, and in many areas of my investing and trading that is exactly what I do, but for the money set aside for this strategy, unless you are of the firm commitment that the markets will crash, and NEVER come back, then this strategy, in my mind, is one that should be evaluated by the guidelines Dr.Joe has set out in his paper.

 

I hope I have answered your question adequately, but feel free to ask for any more specificity if you like.

 

Ken

 

 

 

From: ConservativeOptionStrategies@yahoogroups.com [mailto:ConservativeOptionStrategies@yahoogroups.com] On Behalf Of Jeff
Sent: Saturday, February 27, 2010 7:29 PM
To: ConservativeOptionStrategies@yahoogroups.com
Subject: RE: [ConservativeOptionStrategies] Re: Covered calls with collars

 

 

Ken,

 

What is a reasonable monthly return using this strategy?  Do you experience any losing months?

 

Thanks.

 

Jeff

 

From: ConservativeOptionStrategies@yahoogroups.com [mailto:ConservativeOptionStrategies@yahoogroups.com] On Behalf Of Kenneth Ginsberg
Sent: Saturday, February 27, 2010 4:05 PM
To: ConservativeOptionStrategies@yahoogroups.com
Subject: RE: [ConservativeOptionStrategies] Re: Covered calls with collars

 

 

Jeff:

 

DrJoes DLS strategy that I have been trading  is his DITM Leap Call Strategy vs. Monthly Short Calls as detailed in his paper in the files section. I have not used his Leap DITM  Put strategy, although after reading his paper and some of his posts here I will be spending some time studying it and possibly implementing it at some time in the near future if I find I understand it as well as I do his DLS strategy.

 

Ken

 

 

From: ConservativeOptionStrategies@yahoogroups.com [mailto:ConservativeOptionStrategies@yahoogroups.com] On Behalf Of srj3inc
Sent: Saturday, February 27, 2010 3:40 PM
To: ConservativeOptionStrategies@yahoogroups.com
Subject: [ConservativeOptionStrategies] Re: Covered calls with collars

 

 



--- In ConservativeOptionStrategies@yahoogroups.com, Kenneth Ginsberg <ken_ginsberg@...> wrote:
>
> Jeff:
>
> Let me just say I have been trading DrJoes DLS strategy since ...

------------------
Ken,

Great to know that DLS is working for you.

Can you pl. update us if you are trading the LEAP strategy or selling short term PUT against the DITM LEAP PUT strategy?

Thanks,

__._,_.___
.

__,_._,___
Posted by at No comments:
Subscribe to: Posts (Atom)