Option Trading Articles: Re: [ConservativeOptionStrategies] Re: spy dls update

Sunday, April 18, 2010

Re: [ConservativeOptionStrategies] Re: spy dls update

Dr. Joe.

I am also doing paper tr ding to evaluate the DLS strategy.

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?

Thanks,

Mike

--- On Sun, 4/18/10, joe & leigh <gass20@aol.com> wrote:

From: joe & leigh <gass20@aol.com>
Subject: [ConservativeOptionStrategies] Re: spy dls update
To: ConservativeOptionStrategies@yahoogroups.com
Date: Sunday, April 18, 2010, 3:54 AM

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,
> Â
> 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.
> Â
> Thanks,
> Â
> MikeÂ Â
>
> --- 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
>
>
> Â
>
>
>
> 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
>