Alan, I am glad to answer your question. When I invest in high-yielding covered call positions - as a 10+ year strategy - I am attempting to strictly do so during "optimal" market periods (flat-to-up trends). Most every growth stocks I tightly screen for - will abide nicely with the trend. If they go down it's most always because SOMETHING is very wrong.
Either this is company specific or market-related, that (usually) spells trouble - really fast! MOMO stocks lead to the upside AND to the downside. If it's determined that a triggered STOP is company-specific (often this is only known after the fact), I will then allocate the cash into another selection. When my stops are consecutively triggered it's a good indication that a market shift is pending or already underway (meaning I need to get into or stay in cash). My STOPs naturally do this for me, time-and-again.
In the above example, I say USUALLY, because the recent (unhealthy) market has been anything but that.
Historical: After practically no gains for all of 2007 and just minor gains from 2-month rally off a correction bottom in '08 - - something certainly seemed amiss. Perhaps this market is your only experience, but as recent as the unprecedented late '08 *crash*, these "stop-loss methods" once again proved (amazingly) prudent, as I fully moved to cash in Sep-2008. By the end of the massive 6-month drop, it became very apparent to all what was really happening in the market!
Current: After averting a huge loss, we entered nicely off the '09 "bottom" , but barely kept pace with the market until Q3. Then our methods - for the first time in 12 years - suddenly began to significantly UNDER-perform. Time and again the caution flag was raised - that we consistently heeded...only to find the market vault to new highs in scant trade.
I don't know what your experience has been, but (sticking to my stop methods) this has been very frustrating indeed! I do believe that soon enough, a healthier backdrop will (once again) emerge as it has for the better part (~80%*) of the life of the market. Could this all mean that a severe adjustment will soon be underway? Many think so, but I can't predict. I only follow closely what the daily market does. Meanwhile, I'll stick to my established sell methods and patiently wait for a market reset to once again allow for a nice multi-month move with my long-term CC system.
When I update my performance charts I will try and post them. A pictorial should help bring into perspective the short-term versus my long-term system behavior.
G
* based on IBD research over the life of the market
From: Dale Johnson <outahere3982@yahoo.com>
To: ConservativeOptionStrategies@yahoogroups.com
Sent: Thu, April 1, 2010 1:28:14 PM
Subject: Re: [ConservativeOptionStrategies] My APR-2010 CC Trades - (FXI)
From: Gilbert Arevalo <gilbert_arevalo@ rocketmail. com>
To: CoveredCallFund- Mentoring@ yahoogroups. com
Cc: ConservativeOptionS trategies@ yahoogroups. com
Sent: Thu, April 1, 2010 8:59:56 AM
Subject: [ConservativeOption Strategies] My APR-2010 CC Trades - (FXI)
Either this is company specific or market-related, that (usually) spells trouble - really fast! MOMO stocks lead to the upside AND to the downside. If it's determined that a triggered STOP is company-specific (often this is only known after the fact), I will then allocate the cash into another selection. When my stops are consecutively triggered it's a good indication that a market shift is pending or already underway (meaning I need to get into or stay in cash). My STOPs naturally do this for me, time-and-again.
In the above example, I say USUALLY, because the recent (unhealthy) market has been anything but that.
Historical: After practically no gains for all of 2007 and just minor gains from 2-month rally off a correction bottom in '08 - - something certainly seemed amiss. Perhaps this market is your only experience, but as recent as the unprecedented late '08 *crash*, these "stop-loss methods" once again proved (amazingly) prudent, as I fully moved to cash in Sep-2008. By the end of the massive 6-month drop, it became very apparent to all what was really happening in the market!
Current: After averting a huge loss, we entered nicely off the '09 "bottom" , but barely kept pace with the market until Q3. Then our methods - for the first time in 12 years - suddenly began to significantly UNDER-perform. Time and again the caution flag was raised - that we consistently heeded...only to find the market vault to new highs in scant trade.
I don't know what your experience has been, but (sticking to my stop methods) this has been very frustrating indeed! I do believe that soon enough, a healthier backdrop will (once again) emerge as it has for the better part (~80%*) of the life of the market. Could this all mean that a severe adjustment will soon be underway? Many think so, but I can't predict. I only follow closely what the daily market does. Meanwhile, I'll stick to my established sell methods and patiently wait for a market reset to once again allow for a nice multi-month move with my long-term CC system.
When I update my performance charts I will try and post them. A pictorial should help bring into perspective the short-term versus my long-term system behavior.
G
* based on IBD research over the life of the market
From: Dale Johnson <outahere3982@
To: ConservativeOptionS
Sent: Thu, April 1, 2010 1:28:14 PM
Subject: Re: [ConservativeOption
Gilbert,
I'm fairly new to covered calls and usually on read, and read, and read some more. But can I ask why you set the stop loss so tight?
Alan
From: Gilbert Arevalo <gilbert_arevalo@ rocketmail. com>
To: CoveredCallFund- Mentoring@ yahoogroups. com
Cc: ConservativeOptionS trategies@ yahoogroups. com
Sent: Thu, April 1, 2010 8:59:56 AM
Subject: [ConservativeOption Strategies] My APR-2010 CC Trades - (FXI)
Week of April 3, 2010
Thursday, April 1, 2010
9:30 am EST
Bought 100 shares of FXI (iShares FTSE/Xinhua China 25 Index) at $42.91 (ask).
Sold (1) FXI Apr 43 (FXI1017D43) call option contract at $0.79 (bid).
Stop Loss: $42.12
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
My JAN-2010 to MAR-2010 CC Trades -
http://finance. groups.yahoo. com/group/ ConservativeOpti onStrategies/ message/5726
Also see "KCM 2010 Trading History.doc" in the CoveredCallFund- Mentoring Group files section.
Join my new Y! Group to get these alerts in "real-time" and all CC Fund management training material w/ mentoring & auto-trade, available now.
G
Thursday, April 1, 2010
9:30 am EST
Bought 100 shares of FXI (iShares FTSE/Xinhua China 25 Index) at $42.91 (ask).
Sold (1) FXI Apr 43 (FXI1017D43) call option contract at $0.79 (bid).
Stop Loss: $42.12
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
My JAN-2010 to MAR-2010 CC Trades -
http://finance. groups.yahoo. com/group/ ConservativeOpti onStrategies/ message/5726
Also see "KCM 2010 Trading History.doc" in the CoveredCallFund- Mentoring Group files section.
Join my new Y! Group to get these alerts in "real-time" and all CC Fund management training material w/ mentoring & auto-trade, available now.
G
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