leo i plan to keep a position in spy for many years to come and i already have had it for years. i'm going to have to pay to roll the dec11 to dec12 eventually. buying ditm minimizes vega effect and going further out minimizes theta effect and the dec12 ditm acts similar to outright stock ownership...
--- In ConservativeOptionS
>
> Dr. Joe:
>
> One other question, why pay an extra $5,000 to go with Dec12 leaps
> instead of Dec11 leaps? This could have a significant impact on your
> returns.
>
> Best regards,
> Leo
>
>
>
> ____________
> From: joe & leigh <gass20@...>
> To: ConservativeOptionS
> Sent: Sun, April 18, 2010 1:31:29 PM
> Subject: [ConservativeOption
>
>
> how many leaps did you buy and at what price? how many short calls did you sell? were they 1:1 basis?
>
> did you read my paper? by using an appropriate ratio between short calls and leaps you can retain as much upside as you desire. i only try to get enough upside to pay for itm short calls. my goal is only the income for the short calls not caring about capital gains. one month is hardly anything to make judgments on. going through an up and down market your leaps will be drop and regain value. just focus on the income from short calls. if that isn't enough you probably shouldn't be trading the strategy.... drjoe
>
> --- In ConservativeOptionS trategies@ yahoogroups. com, mike xue <michaelxue88@ ...> wrote:
> >
> > Dr. Joe.
> > Â
> > I am also doing paper tr ding to evaluate the DLS strategy.
> > Â
> > At end of month one: B&H Port value is 1000shx120=$ 120,000. DLS value = 900x41.94+$1946 (short sale) + $78185 (cash)= 117877, is still less than B&H value. I could sell 30 sh of spy in B&H Port to get the income. I think when SPY rises too quick, even DLS gains but is less than B&H, and it will decrease less than B&H when SPY goes down. So DLS has less risks than B&H. But is anything we can do to boost performance when market is going up?
> > Â
> > Thanks,
> > Â
> > Mike
> >
> >
> > --- On Sun, 4/18/10, joe & leigh <gass20@> wrote:
> >
> >
> > From: joe & leigh <gass20@>
> > Subject: [ConservativeOption Strategies] Re: spy dls update
> > To: ConservativeOptionS trategies@ yahoogroups. com
> > Date: Sunday, April 18, 2010, 3:54 AM
> >
> >
> > Â
> >
> >
> >
> > mike,
> > the 5460 needed to cover the short calls is factored into calculation of net investment. drjoe
> > --- In ConservativeOptionS trategies@ yahoogroups. com, mike xue <michaelxue88@ ...> wrote:
> > >
> > > Hi Dr. Joe,
> > > ÂÂ
> > > Thanks for the summary. One Question: I don't know if the net income in your example is correct because you used $5046.05 to cover April 10 114 call. If you just use premium from short call to calculate return, I could sell more calls to get it. But I would need to sell more leap tp cover. I think that a more appropriate way to compare DLS portfolio and B&H fortfolio is to compare their total values.
> > > ÂÂ
> > > Thanks,
> > > ÂÂ
> > > Mike ÂÂ
> > >
> > > --- On Fri, 4/16/10, joe & leigh <gass20@> wrote:
> > >
> > >
> > > From: joe & leigh <gass20@>
> > > Subject: [ConservativeOption Strategies] spy dls update
> > > To: ConservativeOptionS trategies@ yahoogroups. com
> > > Date: Friday, April 16, 2010, 4:19 AM
> > >
> > >
> > > ÂÂ
> > >
> > >
> > >
> > > Account Activity
> > > Date Action Qty Symbol/Description Price Net Amount
> > > 04/15/2010 Buy To Close 7 SPY Apr10 120 Call $1.21 ($857.58)
> > > 04/15/2010 Sell To Open 7 SPY May10 121 Call $2.13 $1,480.39
> > > 04/12/2010 Sell To Open 7 SPY Apr10 120 Call $0.77 $523.96
> > > 04/12/2010 Buy To Close 9 SPY Apr10 114 Call $6.05 ($5,460.05)
> > > 04/12/2010 Sell To Close 1 SPY Dec12 80 Call $41.94 $4,178.97
> > > 03/09/2010 Sell To Open 9 SPY Apr10 114 Call $2.18 $1,946.92
> > > 03/09/2010 Buy To Open 10 SPY Dec12 80 Call $36.30 ($36,315.11)
> > >
> > > net investment = sum (bto long calls minus stc long calls plus btc itm short calls)
> > > = (36315 - 4179 + 5460 + 858) = 38454
> > >
> > > with 9 leap contracts remaining adjusted cost basis is 38454/900 = 42.73
> > > current value of leap is 43.11
> > >
> > > net income = sum of all short call premiums received
> > > = 1947 + 524 + 1480 = 3951
> > >
> > > percent return = 3951/38454 = 10.27% (38 days in trade - annualized = 98.7%)
> > >
> > > spy last 38 days up 5.94% (59.4% annualized)
> > >
> > > if one had buy and hold strategy and entered on 3/9/2010 at 114.5 and 1000 shares would have at risk 114,500 dollars. using dls = 10 contracts at risk was 36,315
> > >
> > > (114,500 - 36315 = 78,185 cash set aside in fixed income NOT leveraged)
> > > use this cash to roll out leaps when current leap has about 12 months to expiration and also add more leaps during market corrections
> > >
> > > drjoe
> > >
> >
>
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