Tuesday, February 23, 2010

[ConservativeOptionStrategies] Re: Covered calls with collars

 



A double calendar using leap puts and calls also covers your put scenarios but also covers you on the upside potential.
You can also sell short puts and also sell short calls.

Your strategy last March 2009 would have been a disaster since the market went straight up after that and rolling up your super put would have been rolling higher and higher losses.

If you had the double calendar the leap calls would have enabled you to make huge profits.

Hank

--- In ConservativeOptionStrategies@yahoogroups.com, "joe & leigh" <gass20@...> wrote:
>
> dom you are incorrect
>
> if iwm as you say continues cruising up after my adjustment the MOST i can lose is 9.35...i would probably own the underlying and with my long put guaranteed 85 dollars for it at jan11 expiration.....
>
> you totally ignore the adjustments possible with the long put and the short put premiums and covered call premiums....it is what it is.....thanks for the comments,,,,i think the thread is now dead...so let's move on....
>
> would love for you to share with the group your current option strategies...thanks drjoe
>
> --- In ConservativeOptionStrategies@yahoogroups.com, Dom Brunone <dombrunone@> wrote:
> >
> > Joe- You are cherry picking your scenarios.
> >  
> > If  IWM continues cruising up after your adjustment, you could lose all that you had invested in the position, ie, 22.35 pts =  173% of your initial investment.
> >  
> > Conversely, if it collapsed after you established the INITIAL  position, you would have lost your 12.95 original investment and earned the spread of 10 on the Puts, therefore losing 2.95 or 29% plus commissions.
> >  
> > My only point is that CONTRARY to your original claim, there is NO GUARANTEE of a profit on this position.
> >  
> > Dom
> >  
> >
> >
> > --- On Tue, 2/23/10, joe & leigh <gass20@> wrote:
> >
> >
> > From: joe & leigh <gass20@>
> > Subject: [ConservativeOptionStrategies] Re: Covered calls with collars
> > To: ConservativeOptionStrategies@yahoogroups.com
> > Date: Tuesday, February 23, 2010, 10:12 AM
> >
> >
> >  
> >
> >
> >
> > dom/hank: let's summarize position
> >
> > iwm 60.58 (not owned)
> >
> > sto may10 60 put @ 3.15
> > bto jan12 70 put @ (16.10)
> > net invested (12.95)
> >
> > iwm increases to 72 within days ADJUSTMENT
> >
> > stc jan12 70 put @ 7.3
> > bto jan11 85 put @ (16.7)
> >
> > new net invested is now (22.35) = (16.7)+(12.95) -7.3  Agree
> >
> > stock suddenly collapses to zero
> >
> > i'm asssigned on 60 may10 put for (60)
> > i exercise my 70 jan11 put for 85
> > i net 25 with net invested of 22.35 or profit of 2.65
> > return = 2.65/22.35 = 11.65%
> >
> > if stock just sits there i could close my may10-60 put now worthless, buy the stock @ 72
> > have a total now invested of 72 + 22.35 or 94.35 and guaranteed 85 in jan11 or at risk only 9.35
> >
> > i could now in feb....sell monthly covered calls at the money an premiums are around 2 dollars for each month.....thats 10 months of 2 dollars or 20 dollars
> >
> > drjoe
> >
> > --- In ConservativeOptionS trategies@ yahoogroups. com, "HankF" <hanksterr@ ..> wrote:
> > >
> > >
> > > Dom,
> > > I have to agree with you.
> > > Very well layed out,
> > > Hank
> > >
> > > --- In ConservativeOptionS trategies@ yahoogroups. com, Dom Brunone <dombrunone@ > wrote:
> > > >
> > > >
> > > >
> > > > Yes, DrJoe, I did read the entire thread, I was giving you the benefit of the doubt. You had mentioned receiving dividends in the early part of the thread, so I thought you were referring to an underlying position.   And I've been trading options for many years.
> > > >  
> > > > OK, no underlying position.  One more time. 
> > > > Per your notes below, re-copied here in Blue italics, you start out the position as follows:
> > > >  
> > > > > let's look at my leap
> > > > > using option calculator for an example:
> > > > > stock = 60
> > > > > jan 12 leap strike 70 with premium of 16.1 (700 dte)
> > > > > time value is 6.1 (remember you want to sell time value)
> > > > > intrinsic value is 10....that is our money
> > > > > now the underlying as you mentioned jumped 20% to 72 during the 90 day naked put i sold ....
> > > > > now 610 dte (days to expiration)
> > > > > what i do is sell a naked put around 90 days out with the put atm
> > > > > ex. May put on IWM IWM is 60.58 sell the 60 put at 3.15
> > > >  
> > > > > now the underlying as you mentioned jumped 20% to 72 during the 90 day naked put i sold ...
> > > > > what is the value of my leap?
> > > > > the 70 leap put is now = 7.3 all time value
> > > > > so let's do this
> > > > > roll the 70 leap put to the 85 put with 335 dte
> > > > > so i sell the 70 leap put and keep my 7.3 time value
> > > >
> > > > So, here is what you did:
> > > >  
> > > > BTO Jan 2012, 70 Put @ 16.1
> > > > STO May 2010 60 Put @ 3.15
> > > >  
> > > > ...then under my assumption above that IWM rallies, you suggested to 72, you then:
> > > >  
> > > > STC Jan 2012 70 Put @ 7.3 ------------ ------->  Loss = 16.1 - 7.3 = 8.80 pts.
> > > > May 2010 60 Put expires worthless.   ------> Gain = 3.15 - 0.0 = 3.15 pts.
> > > > Your Net Loss = 5.65 pts.
> > > >  
> > > > NOW, you can do whatever you like initiating a new position, but that is your loss thus far on the closed trades.  I don't see what you mean when you say that you guarantee yourself a return of 70.  Frankly, 70 is not a return, and it is not guaranteed.
> > > >  
> > > > Dom
> > > >  
> > > >  
> > > >
> > > >
> > > > --- On Fri, 2/12/10, joe & leigh <gass20@> wrote:
> > > >
> > > >
> > > > From: joe & leigh <gass20@>
> > > > Subject: [ConservativeOption Strategies] Re: Covered calls with collars
> > > > To: ConservativeOptionS trategies@ yahoogroups. com
> > > > Date: Friday, February 12, 2010, 2:05 PM
> > > >
> > > >
> > > >  
> > > >
> > > >
> > > >
> > > > dom,,,did you read the whole thread? regarding your post below what stock price is it? i am guaranteed a return of 70 at long put expiration.. ???? ..i said several times in posts i start with a naked put near term and long put long term no underlying stock owned....only if short term put assigned do i start selling covered calls...drjoe
> > > >
> > > > --- In ConservativeOptionS trategies@ yahoogroups. com, Dom Brunone <dombrunone@ ...> wrote:
> > > > >
> > > > >
> > > > > DrJoe, thank you for the explanation.
> > > > >  
> > > > > I was assuming from your earlier note that you put on the Long ITM Leap Put/ Short ATM  Put WITHOUT owning the underlying stock.  Was I wrong about that?
> > > > >  
> > > > > If my assumption  is correct, then you have just closed out both sides of your original position for a loss of -4.7 points, as follows:
> > > > >  
> > > > > BOT 70 Leap Put @ 15.16, SLD @ 7.30 = -7.86
> > > > > SLD 60 Put @ 3.15, expires worthless= +3.15
> > > > >  
> > > > > And now you are trying again by putting on a slightly different position.
> > > > >  
> > > > > If my assumption is not correct, and you actually owned the underlying, then your original Long itm Leap Put/ Short atm Put position does not provide much downside protection. 
> > > > >  
> > > > > Please tell me where I am going wrong.
> > > > >  
> > > > > Dom
> > > > >
> > > > > --- On Fri, 2/12/10, joe & leigh <gass20@> wrote:
> > > > >
> > > > >
> > > > > From: joe & leigh <gass20@>
> > > > > Subject: [ConservativeOption Strategies] Re: Covered calls with collars
> > > > > To: ConservativeOptionS trategies@ yahoogroups. com
> > > > > Date: Friday, February 12, 2010, 1:16 PM
> > > > >
> > > > >
> > > > >  
> > > > >
> > > > >
> > > > >
> > > > >
> > > > >
> > > > > dom ....NOT at all
> > > > >
> > > > > actually a great thing....my naked puts or call premiums are coming to me as income
> > > > >
> > > > > let's look at my leap
> > > > >
> > > > > using option calculator for an example:
> > > > >
> > > > > stock = 60
> > > > > jan 12 leap strike 70 with premium of 16.1 (700 dte)
> > > > > time value is 6.1 (remember you want to sell time value)
> > > > > intrinsic value is 10....that is our money
> > > > >
> > > > > now the underlying as you mentioned jumped 20% to 72 during the 90 day naked put i sold ....
> > > > >
> > > > > now 610 dte (days to expiration)
> > > > >
> > > > > what is the value of my leap?
> > > > >
> > > > > the 70 leap put is now = 7.3 all time value
> > > > >
> > > > > so let's do this
> > > > >
> > > > > roll the 70 leap put to the 85 put with 335 dte
> > > > >
> > > > > so i sell the 70 leap put and keep my 7.3 time value which i always love selling time value
> > > > >
> > > > > now i still want protection stock is now 72 i still want a deep in the money put protection roughly 15% ie around 85 strike
> > > > >
> > > > > so i roll in a year and the premium is 16.7
> > > > > time value is 72+16.7 or 88.7 minus 85 or 3.7
> > > > >
> > > > > gees captured 3.6 dollars of time value
> > > > >
> > > > > now protected my stock that jumped from 60 to 72
> > > > >
> > > > > so there are ways of adjusting puts to capture time value and increase income
> > > > >
> > > > > drjoe
> > > > >
> > > > > --- In ConservativeOptionS trategies@ yahoogroups. com, Dom Brunone <dombrunone@ ...> wrote:
> > > > > >
> > > > > > Thanks, Joe, makes sense.
> > > > > >
> > > > > > I guess the only thing that leaves you exposed to is a serious rally in the underlying where your long Leap Put decreases in value much more thanÃÆ'‚ your short put gains.
> > > > > > ÃÆ'‚ 
> > > > > > DomÃÆ'‚ 
> > > > > >
> > > > > > --- On Fri, 2/12/10, joe & leigh <gass20@> wrote:
> > > > > >
> > > > > >
> > > > > > From: joe & leigh <gass20@>
> > > > > > Subject: [ConservativeOption Strategies] Re: Covered calls with collars
> > > > > > To: ConservativeOptionS trategies@ yahoogroups. com
> > > > > > Date: Friday, February 12, 2010, 11:14 AM
> > > > > >
> > > > > >
> > > > > > ÃÆ'‚ 
> > > > > >
> > > > > >
> > > > > >
> > > > > > dom, i start out always with a stock i want to own in my portfolio... ie etf's,,,,,,instead of buy the stock i use strategies to make money on it and willing to own it if assigned.... for example iwm......... i start with a near term short put and long term long put (in-the-money) .....if the short term is assigned i own the stock i wanted and then i start doing doing covered calls......and remember if right before being assigned you could roll your short put out , ie btc then sell to open another short put and have enough money to decrease your exposure, ie if you had 10 contracts can usually roll with no additional money to have 7....can usually roll 2-4 times to furthest expiration almost eliminating exposure.... i don't usually do that with etf...drjoe
> > > > > >
> > > > > > --- In ConservativeOptionS trategies@ yahoogroups. com, Dom Brunone <dombrunone@ ...> wrote:
> > > > > > >
> > > > > > > Thanks, DrJoe, butÃÆ'Æ'‚ÃÆ'‚ just to clarify....I understand the Long & Short Puts.ÃÆ'Æ'‚ÃÆ'‚  What I dont understand, given the context of the original question, is that a standalone position, or isÃÆ'Æ'‚ÃÆ'‚ there also a covered call position in IWM as well?
> > > > > > > ÃÆ'Æ'‚ÃÆ'‚ 
> > > > > > > Thanks in advance.
> > > > > > > ÃÆ'Æ'‚ÃÆ'‚ 
> > > > > > > Dom
> > > > > > >
> > > > > > > --- On Fri, 2/12/10, joe & leigh <gass20@> wrote:
> > > > > > >
> > > > > > >
> > > > > > > From: joe & leigh <gass20@>
> > > > > > > Subject: [ConservativeOption Strategies] Re: Covered calls with collars
> > > > > > > To: ConservativeOptionS trategies@ yahoogroups. com
> > > > > > > Date: Friday, February 12, 2010, 7:46 AM
> > > > > > >
> > > > > > >
> > > > > > > ÃÆ'Æ'‚ÃÆ'‚ 
> > > > > > >
> > > > > > >
> > > > > > >
> > > > > > > michael i've been very successful.. ..always limit risk at 10% with usually 2 year dte protective puts....selling naked puts and covered calls during those two years along with put adjustments such as rolling in or in and up to capture capital gains or rolling puts out...sticking with etf's usually iwm.....i have generated a steady stream of income without losing sleep...drjoe
> > > > > > >
> > > > > > > --- In ConservativeOptionS trategies@ yahoogroups. com, "optionsmike" <michael@ > wrote:
> > > > > > > >
> > > > > > > > Dr. Joe,
> > > > > > > > Thanks for posting your strategy. This is one I'll have to think about and maybe paper trade it. It's a longer-term approach. How successful have you been with it?
> > > > > > > >
> > > > > > > > Michael
> > > > > > > > www.safe-options- trading-income. com
> > > > > > > >
> > > > > > > > --- In ConservativeOptionS trategies@ yahoogroups. com, "joe & leigh" <gass20@> wrote:
> > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > --- In ConservativeOptionS trategies@ yahoogroups. com, "optionsmike" <michael@> wrote:
> > > > > > > > > >
> > > > > > > > > > All,
> > > > > > > > > > A question for the group. Does anyone in the group who uses covered calls ever collar the call with a protective put? My impression is that not too many people do.
> > > > > > > > > >
> > > > > > > > > > Michael
> > > > > > > > > > www.safe-options- trading-income. com
> > > > > > > > > >
> > > > > > > > >
> > > > > > > > >
> > > > > > > > > mike i have a strategy that i usually have one open position.
> > > > > > > > >
> > > > > > > > > what i do is sell a naked put around 90 days out with the put atm
> > > > > > > > > ex. may put on IWM IWM is 60.58 sell the 60 put at 3.15
> > > > > > > > >
> > > > > > > > > then i buy a protective put itm farthest one out
> > > > > > > > > ex. jan 12 - 70 put for 15.16 with time value of only 5.58 for two years of protection that is a 9.3% max risk not factoring in 4% dividends over 2 years which brings it down to 5.3%
> > > > > > > > >
> > > > > > > > > if i don't get assigned on the short put i repeat it
> > > > > > > > > if i get assigned i sell covered calls 90 days out with strike at cost basis
> > > > > > > > >
> > > > > > > > > over the next year i adjust the long protective put based on the changes of the underlying
> > > > > > > > >
> > > > > > > > > dr joe
> > > > > > > > >
> > > > > > > >
> > > > > > >
> > > > > >
> > > > >
> > > >
> > >
> >
>

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