hank, good choice....remember when premiums go up a lot suddenly, there is news brewing that we don't know about,,,,,today proved that....good luck on your longer out GS covered calls.....drjoe
--- In ConservativeOptionS
>
>
> Hi,
> I think I will just let it be assigned to free up some cash to put into other things.
> I still have some longer out GS covered calls.
> Thanks.
>
> --- In ConservativeOptionS
> >
> > hank,
> > that's a question i can't answer. depends on what your outlook for GS is over the next 30 days. if you think it will stay flat or increase... roll (generally when 0.25 or less of time value remaining) if uncertain outlook or negative, take your profit and look for other opportunities. drjoe
> >
> > --- In ConservativeOptionS
> > >
> > > Dr Joe,
> > > Your new clear format is great.
> > > I can see what you are doing now.
> > >
> > > I have GS Apr 180 calls for 3.89 and am wondering should I let this be assigned or roll to May.
> > >
> > > Thanks.
> > >
> > >
> > > --- In ConservativeOptionS
> > > >
> > > > Nope,
> > > > let's take iwm for example but let's use 9 contracts for simplicity..
> > > > i would sell
> > > > 3 contracts for july strike 71
> > > > 3 contracts for july strike 67
> > > > 3 contracts for july strike 64
> > > > then at may expiration
> > > > 3 contracts for aug strike atm (depends on price of iwm at that time)
> > > > 3 contracts for aug strike 5% otm
> > > > 3 contracts for aug strike 10% otm
> > > > then at june expiration
> > > > 3 contracts for sept strike atm (depends on price of iwm at that time)
> > > > 3 contracts for sept strike 5% otm
> > > > 3 contracts for sept strike 10% otm
> > > >
> > > > end of 3 months i would have 27 contracts outstanding, next month, ie july all the july options expiring. all otm or some assigned. if assigned place covered calls. for contracts not assigned continue selling puts......drjoe
> > > >
> > > > --- In ConservativeOptionS
> > > > >
> > > > >
> > > > > Dr Joe,
> > > > >
> > > > >
> > > > >
> > > > > Thanks for your input for the CSP strategy. I have a question on the
> > > > > staggered Buy approach (ATM, OTM) you mentioned.
> > > > >
> > > > >
> > > > >
> > > > > For my understanding I followed this way:
> > > > >
> > > > >
> > > > >
> > > > > Take IWM as an example, and
> > > > >
> > > > > Let's say my total position size is 30 contracts (this will help
> > > > > simplify the counts).
> > > > >
> > > > >
> > > > >
> > > > > Today is 14 Apr 2010. IWM is @71.00 (rounded off for simplicity)
> > > > >
> > > > >
> > > > >
> > > > > I STO 10 PUTs at ATM for July expiration at strike 71.
> > > > >
> > > > >
> > > > >
> > > > > Then next month (around 15-17May), I will have another STO order for 10
> > > > > contracts of Aug expiration at 5% OTM strike with respect to the then
> > > > > stock price of that day in May.
> > > > >
> > > > >
> > > > >
> > > > > and in June, another STO for 10 PUT Sep expiration 10% OTM strike with
> > > > > respect to the then stock price of June?
> > > > >
> > > > >
> > > > >
> > > > > Is this understanding correct from your perspective?
> > > > >
> > > > >
> > > > >
> > > > > Thanks again,
> > > > >
> > > > >
> > > > >
> > > > > - SRJ
> > > > >
> > > > >
> > > > >
> > > > > --- In ConservativeOptionS
> > > > > <gass20@> wrote:
> > > > > >
> > > > > > dan you are a hundred percent correct it was a typo.......the total of
> > > > > 3 monthly contracts should be what your risk and position size should
> > > > > be.....after the initial setup starting month one with no contracts
> > > > > ...at month number 3 the contract size (either with stock/cc or puts)
> > > > > will be consistent).
> > > > > first 3 months....thanks for pointing out the typo........
> > > > > >
> > > > > > --- In ConservativeOptionS
> > > > > wrote:
> > > > > > >
> > > > > > > Hi Dr. Joe,
> > > > > > >
> > > > > > > Thank you for a very detailed and enlightening post on your
> > > > > strategy.
> > > > > > > I would like to clarify one item, having to do with position sizing.
> > > > > > > If I wish to limit my position size to 27 contracts, you wrote that
> > > > > the
> > > > > > > details would be as follows.
> > > > > > > November sell to open 9 contracts ATM, 9 contracts 5% OTM and 9
> > > > > contracts
> > > > > > > for 10% OTM for February expiration.
> > > > > > > Repeat for December and January each with one month later
> > > > > expiration.
> > > > > > >
> > > > > > > Since I will have 81 contracts open at a time, if I wished to use
> > > > > cash to
> > > > > > > secure the puts would I not need enough cash for 8100 shares?
> > > > > > >
> > > > > > > Dan (dan2fl)
> > > > > > >
> > > > > > >
> > > > > > >
> > > > > > > -----Original Message-----
> > > > > > > From: ConservativeOptionS
> > > > > > > [mailto:ConservativeOptionS
> > > > > joe &
> > > > > > > leigh
> > > > > > > Sent: Thursday, March 25, 2010 9:28 AM
> > > > > > > To: ConservativeOptionS
> > > > > > > Subject: [ConservativeOption
> > > > > > >
> > > > > > > mike my basic strategy for cash-secured puts is below: i do vary it
> > > > > on a
> > > > > > > regular basis but
> > > > > > > much the basic principles i use to trade it. i use almost
> > > > > exclusively
> > > > > > > trade iwm. as you will read below i sell atm, 5%otm and 10%otm puts
> > > > > with
> > > > > > > equal lots of each. over the past 194 months from jan 1994 to
> > > > > present iwm
> > > > > > > dropped greater than 5% only 30 times or 15.5%, greater than 10%
> > > > > only 8
> > > > > > > times or 4.1% and over 15% only 3 times or 1.5%.
> > > > > > >
> > > > > > >
> > > > > > >
> > > > > > > CASH-SECURED PUT STRATEGY
> > > > > > >
> > > > > > >
> > > > > > > INDEX
> > > > > > > Diversified ETF: SPY, IWM (favorite), EFA, EEM, QQQQ, for example.
> > > > > > >
> > > > > > >
> > > > > > > POSITION SIZE
> > > > > > > Determine the size of the position if you were buying that index
> > > > > > >
> > > > > > > for your buy-and-hold strategy. Do NOT leaverage !!!!!!!
> > > > > > >
> > > > > > > If you wanted 2700 shares in your portfolio, then do not STO
> > > > > > >
> > > > > > > more than 27 contracts. Assuming you have no shares currently.
> > > > > > >
> > > > > > >
> > > > > > > EXPIRATION
> > > > > > > Ninety days (90)
> > > > > > >
> > > > > > > Leg in 1/3 of calculated position size every 30 days
> > > > > > >
> > > > > > > ie. If 27 contracts is your determine final position size, then
> > > > > > >
> > > > > > > Nov expiration STO 9 contracts Feb expiration
> > > > > > >
> > > > > > > Dec expiration STO 9 contracts Mar expiration
> > > > > > >
> > > > > > > Jan expiration STO 9 contracts Apr expiration
> > > > > > >
> > > > > > > Feb expiration initial 9 expiring to be managed
> > > > > > >
> > > > > > >
> > > > > > > STRIKE
> > > > > > > 1/3 or 9 contracts ATM
> > > > > > >
> > > > > > > 1/3 or 9 contracts 5% OTM
> > > > > > >
> > > > > > > 1/3 or 9 contracts 10% OTM
> > > > > > >
> > > > > > >
> > > > > > > FUNDING
> > > > > > > 100% secured with cash or 50% cash account and 50% in
> > > > > > >
> > > > > > > fixed income ETF
> > > > > > >
> > > > > > >
> > > > > > > MANAGING OPEN POSITIONS
> > > > > > >
> > > > > > >
> > > > > > > BEFORE EXPIRATION
> > > > > > >
> > > > > > >
> > > > > > > If stock is above put strike no management required.
> > > > > > >
> > > > > > > What are the options if the index is decreasing in price?
> > > > > > >
> > > > > > >
> > > > > > > 1. Close position at a loss
> > > > > > >
> > > > > > > 2. Buy leap puts for protection
> > > > > > >
> > > > > > > If decreases 5%, purchase 50% leap puts
> > > > > > >
> > > > > > > If decreases 10%, purchase other 50% leap puts
> > > > > > >
> > > > > > > Strike at CSP (cash-secured put) strike price or
> > > > > > >
> > > > > > > at current stock price based on your risk
> > > > > > >
> > > > > > >
> > > > > > > Since the above 3 strikes gives one 5% protection
> > > > > > >
> > > > > > > and I am willing to accept some loss, I place a contingent order in
> > > > > > >
> > > > > > > the initial setup to purchase leap puts when stock decreases 10%
> > > > > and
> > > > > > >
> > > > > > > I choose a strike that is 10% ITM. Ie. Initial setup stock was
> > > > > > > $100.
> > > > > > > The initial strikes would be $100, $95, $90 (0, 5%, 10% OTM)
> > > > > > >
> > > > > > > I woud put a contingent order in to purchase the leap put with a
> > > > > > > strike
> > > > > > > of $100 when underlying decreases to $90.
> > > > > > >
> > > > > > >
> > > > > > > 3. Roll the CSP
> > > > > > >
> > > > > > > Roll out and down and decrease number of contracts
> > > > > > >
> > > > > > > Can be done for net credit or approx break even
> > > > > > >
> > > > > > >
> > > > > > > example: based on Dec 2, 2009
> > > > > > >
> > > > > > >
> > > > > > > IWM @ $58.99
> > > > > > > CSP is Feb 58 Put @ $2.84 ---10 contracts
> > > > > > >
> > > > > > >
> > > > > > > Look at June 56 Put and Sept 56 Put
> > > > > > >
> > > > > > > June 56 @ $4.35
> > > > > > > Sept 56 @ $5.55
> > > > > > >
> > > > > > > Market drops 5% today to $56
> > > > > > >
> > > > > > > Using option calculator the
> > > > > > >
> > > > > > > June 56 increases to $5.57
> > > > > > >
> > > > > > > Sept 56 increases to $6.67
> > > > > > >
> > > > > > > Feb 58 increases to $4.32
> > > > > > >
> > > > > > >
> > > > > > > BTC Feb 58 for 1000 * $4.32 or $4320
> > > > > > >
> > > > > > > STO June 56 - 8 contracts for 800 * $5.57 or $4456
> > > > > > >
> > > > > > > You have reduced your risk 20%
> > > > > > >
> > > > > > > or
> > > > > > > STO Sept 56 - 6 contracts for $4056 or
> > > > > > >
> > > > > > > 7 contracts for $4732 reducing risk 30-40%
> > > > > > >
> > > > > > >
> > > > > > > Regarding rolling CSP's: each time you roll you should be
> > > > > > > able
> > > > > > > to decrease your exposure. First roll usually can decrease
> > > > > > > 10
> > > > > > > contracts to 7 or 8, second roll the 7 or 8 to 5 or 6 and a
> > > > > > > third
> > > > > > > roll the 5 or 6 to 3 or 4. All without adding new money and
> > > > > > >
> > > > > > > frees up margin each time
> > > > > > >
> > > > > > >
> > > > > > > 4. Do nothing until expiration
> > > > > > >
> > > > > > >
> > > > > > >
> > > > > > > AT EXPIRATION
> > > > > > >
> > > > > > > Stock > put strike price
> > > > > > >
> > > > > > > Continue selling CSP same as above
> > > > > > >
> > > > > > >
> > > > > > > Stock < put strike price and assigned
> > > > > > >
> > > > > > > Sell covered calls 3 months to expiration
> > > > > > >
> > > > > > > Strike NO less than cost basis, ie put strike at assignment
> > > > > > >
> > > > > > > If premium is small because stock has dropped
> > > > > > >
> > > > > > > significantly, sell at a strike less than cost basis if you
> > > > > > >
> > > > > > > understand how to manage covered calls and prepared to
> > > > > > >
> > > > > > > roll out to avoid being exercised before expiration
> > > > > > >
> > > > > > > below your cost basis
> > > > > > >
> > > > > > >
> > > > > > > GOAL be exercised at or above cost basis and go back to selling
> > > > > > > CSP's
> > > > > > >
> > > > > > >
> > > > > > >
> > > > > > >
> > > > > > >
> > > > > > > --- In ConservativeOptionS
> > > > > > > <michael@> wrote:
> > > > > > > >
> > > > > > > > Dr Joe,
> > > > > > > > I'll start it off. I like writing front-month cash-secured
> > > > > puts. I
> > > > > > > like to do them on somewhat high-beta stocks (e.g. TSL, IPI) and
> > > > > well as
> > > > > > > more stable stocks such as PFE, MRK, XOM. I tend to avoid samll drug
> > > > > and
> > > > > > > biotech stocks becase of past dissapointment. I try to enter these
> > > > > csp's on
> > > > > > > down days. I will take a profit at .05 to .15, if reached, before
> > > > > > > expiration. I write only enough puts (3 to 10 depending on the
> > > > > strike price)
> > > > > > > that if assigned I'm equally happy and then will write calls on
> > > > > these. I
> > > > > > > will consider putting a protective collar on some of these if they
> > > > > advance
> > > > > > > far enough although I prefer to be called out. I do this in a
> > > > > tax-deferred
> > > > > > > account. In my taxable account I like to do front-month credit
> > > > > spreads on
> > > > > > > ETF's.
> > > > > > > >
> > > > > > > > Michael
> > > > > > > > www.safe-options-
> > > > > > > >
> > > > > > > > --- In ConservativeOptionS
> > > > > > > <gass20@> wrote:
> > > > > > > > >
> > > > > > > > > i really would love to hear from people who are doing dls
> > > > > (calls) and
> > > > > > > short puts selling cc's if assigned,,,,
> > > > > adjustments
> > > > > > > etc....do you use protection with long puts....maybe we can get a
> > > > > discussion
> > > > > > > going....drjoe.
> > > > > been
> > > > > > > deleted
> > > > > > > > >
> > > > > > > >
> > > > > > >
> > > > > > >
> > > > > > >
> > > > > > >
> > > > > > > ------------
> > > > > > >
> > > > > > > Yahoo! Groups Links
> > > > > > >
> > > > > >
> > > > >
> > > >
> > >
> >
>
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