I will repost (2) questions I received and answer them my best -
Hi,
I would love to know 100% of your system and trade examples.
I am looking to get more consistent, and accept less returns, but at least 1,5% a month.
I also would like to use the same stocks over an over so I get to know their moves better.
I have a lot to share also.
Looking forward to hearing more.
Thanks.
Hank
- -
2Hank that can be extended to you and anyone else interested. Although, it looks to me that a lower monthly return - spread out equally over all months - would take a different strategy approach than mine. I take what the market gives me. Some years it is 3 months, others 6 and others perhaps 9 - but I do not marry a stock. I have strict stop-loss methods (described before) and I stick to them. More often than not when I get stopped into cash -- and uncertain market turns dire. . .at least temporarily for momo or market leading stocks as these decline the sharpest the fastest (highest yield=high-octane strategy).
Even still I find this easy to manage and I sleep well at night - with an excellent result. In this case, I simple "wait-and-see" for the market to "confirm" a new uptrend to begin phasing back into high beta CC plays. I can get a sharp ~20% runup in just 3 months (approximating, but you get the gist), ~50% in 6 months and perhaps 85% in 9 months. The *KEY* is to be patient (gains will come at some point in the year - or year-and-a-half at the extremes like 2007 and 2009) and proven stop methods will get you out and into cash before the market severely drops - leaving you with most of your compounded gains to routinely compound further very near the lows of the next bottom.
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Hi Gilbert,
Saw your post on CCs and I'm interested to learn more. I've been an active
CC trader for 20 years. It's my main strategy. But I'm always interested in
what others are doing.
Specifically, I'm curious about:
(1) do you use margin (Reg T or Portfolio Margin)? I do (I get about 4x with
PM, but I'm selling DITM CCs so I'm okay with the exposure).
(2) what CC tools (if any) do you use? Do you pay for any subscription
services that help with CC filtering or monitoring? I've used CallWriter on
and off but I don't like his interface much.
(3) what is your target return per month?
(4) Do you care about dividend yield?
(5) Do you consciously focus on sector diversification (so you have some
healthcare, some financial, tech, etc)?
(6) Anything else that is key to your successful strategy...
Thanks!
MikeS
- -
2Mike
Well I hope the above clarifies a bit more. I define "limited-margin" use as borrowing against your cash account or up to 2X available. Of this I at most use 1.5X - only during VERY opportune market periods (like off the bottom/beginning of 2003 rally and about a few months on average per each given year.
Like you, when it is deems opportunistic to NOT close a deep-in-the-
I do not target a monthly return, as I believe my high-growth strategy extracts the most possible out of the market using CC's and is only what the market can give on any given year. I average (over multi-year periods) 25% out-performance versus the Nasdaq, so you do the math. Read above where I explain I may only be into CC's so many months per year - but I try for the most IF the market cooperates.
No, I do not care about dividend yield for obvious reasons.
I do diversify as much as possible without managing too many positions into various sectors. I used to mostly always have a biotech - which on average produced good gains (perhaps a bit more than others after subtracting stopped positions), but these are more of a headache than anything so now I avoid.
The key is to be able to successfully manage 1/10 your net worth into your full net worth and confidently beyond with a high CAGR (compounded annual return) low max DD (drawdown) - which of course, by definition HAS to be manage for years! Take a 20-yr mutual fund chart and shrink it down to 5 years. This is what your growth should look like. Sleep well and never have a HUGE DD to wipe out years of gains.
http://tinyurl. com/y8q3fep will show a post whereby I avoided a sever 21-day drop in 2008. Felt pretty routine -- unlike this *c*r*a*z*y* market that incessantly wants to not really go nowhere with very high risk;)
Good times are coming!
G
--- In ConservativeOptionS
>
> Hi. I am new to the board with a recent reply:
>
> Re: Let's Get the Site Active Again !!
>
> My covered call strategy is no doubt a lot simpler than most. many a "mantra" I
> take from IBD like: "The safest place to be during a market downtrend is in
> cash."
>
> My stop methods got me cashed out before the big 21-day drop
> (http://tinyurl.
>
> G
>
> I see the board hasn't been active much until recently. It has been an interesting couple of years for my covered call system - perhaps that played some part in this.
>
> IMHO I think the current market rally has nearly run it's course and that when (not if) we get a market correction (>10% decline) a lot of the remaining excess (market volatility) will be removed - to once again make a prime environment for my CC strategy.
>
> I can share a lot and will make an attempt to update regularly so let's start by saying in this forum I will speak mostly on what I know best regarding option strategies: covered calls.
>
> I've been very focussed in this area of trading for over 10 years - and I've seen almost every kind of market environment. How does it apply to my long-term approach?
>
> I sell covered calls against underlying market-leading growth stocks during flat-uptrending market periods. IBD helps me with indicating
> "tops" and "bottoms". I cash out during market corrections and bear markets.
>
> This system has worked quite well for over a decade. If any are interested I can share some of this with you. Key to my high-growth strategy are maximizing the effect of "compounding" monthly returns - while keeping tight rein on losses in the event of a downturn.
>
> My stop methods have proven to be integral in the success of this strategy. My CAGR or compound annual growth rate is superb and max drawdown well-contained - all key to a true long-term winning strategy.
>
> My stance right now is "Caution" and I have pared back to limited exposure - taking my cue from institutions on whether or not the stocks will move higher or fall off and correct.
>
> I can be quite nimble and patient - but I do not hold onto losing positions. When the trend is our friend - vehement gains can be made in a fairly safe and conservative manner. . .but I cash out (stop=stock purchase price minus option premium) during uncertainty.
>
> Fortunately, phasing in and out of market trends has been consistently profitable. Ramped up gains over the years have for the most part been retained using my stop methods.
>
> I have had to be cautious these last few months - while the market run continued. Perhaps in the near future we'll see the next sudden decline and a subsequent move off the bottom making my strategy less risky to get fully invested again in covered call positions.
>
> I would like to share this with those interested, since I've monitored most all cc strategies and find my result to be tops. Many may have been exposed along with the added risk this past half-year to gain more in 2009 (while I simply made sure past compounded returns are retained), but with my system you have to take in many or all market years.
>
> Getting risky in one year for a temporary jump in gains may very well work against you bringing sudden severe drawdown and steep account loss, rendering years of system gains worthless. If one is patient, no gains for a while will bring much gains and/or outperformance as I've seen time and again.
>
> Like I say with investing using covered calls or most anything -- a steady high-growth compounded average managed for YEARS is the surest way to long-term prosperity and great wealth.
>
> G
>
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