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

Sunday, April 18, 2010

Re: [ConservativeOptionStrategies] spy dls update

Hi Dr. Joe,

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.

Thanks,

Mike

--- On Fri, 4/16/10, joe & leigh <gass20@aol.com> wrote:

From: joe & leigh <gass20@aol.com>
Subject: [ConservativeOptionStrategies] spy dls update
To: ConservativeOptionStrategies@yahoogroups.com
Date: Friday, April 16, 2010, 4:19 AM

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