CLNE, CHK, JPM, CAT, FCX, SLW, GTLS
FROM THE LOG: Friday, June 29, 2012
Mostly a harvest day today, the last trading day of the month.
-3 Aug 16 Calls @ .75, or $225
+6 Jul 13 Puts @.10, or $60
We originally sold the 13 Puts for $.45, or $270, netting $210 on the position. Next down day, we will sell more puts. Cost Per Share (CPS) includes commissions and is net= $23.39.
+5 Jul 15 Puts @ .20, or $100
We originally sold the 15 Puts for $1.07, or %535, netting $435 on the position. Looking for the opportunity to sell 10 put contracts. CPS = $14.66. Days to Zero (DTZ)=124. That means if we continue at the rate we are going, we will reach a Cost per Share of Zero in 124 days.
+2 Jun Weekly(1) 35 Calls @ .82, or $164
-2 Jul Weekly(8) 35 Calls @ .97, or $194
Rolled the Weekly 25 calls with 1 day (actually no days) left out into the next week with 8 days remaining for a slight advantage in additional premium. We could have let the stock be called but because we could roll it for a slight gain, chose that route instead. The object is to always go forward, not backward. Our CPS = $53.93.
Patience. All this requires patience. At the rate we are going on JPM, we will see a CPS of ZERO in 658 days. It pays to have a sense of humor in trading.
On a serious note, this tells us that we are not trading adequate sizes so will step up the game next week.
-1 Jul 85 Call @ 1.73, or $173
Sold a little more premium today. CPS = $88.72, above the close today at $84.91, but we are closing in on the share price after buying the stock Feb 13th at $112.68. We have recovered a large portion of the decline, however, our DTZ = 507 days, and like JPM above, we are not sized right on this one. We will address that next week.
+5 Jul Weekly(8) @.16, or $80
Yesterday, we opened a new position in Gold miners by selling the weekly puts for .76, or $380. Today, we closed out the position at .16, or $80, keeping $300. We have an 80% rule that mandates we close out any position that earns 80% of the available premium. In this case, we held the position for one day before reaching 80%.
+5 Jul Weekly(8) 25 Puts @ .08, or $40
Yesterday, we opened SLW by selling the Weekly puts for .38, or $190. Closed the puts out today at .08, for a small gain of $150. We would like to own SLW so will keep selling puts until we get the stock. Then we will sell calls to drive down the CPS.
+2 Jul 55 Puts @ .20, or $40
Originally sold these puts for $1.40, or $280. Today, we closed out the position at .20, for a gain of $240.
Our CPS = 61.76, below today’s close of $68.76. DTZ = 521.
AGQ with 20 days to go is on course and premium decay (Theta) is increasing at a rapid pace. This lop-sided condor( 20 puts to 9 calls) now has a probability of 96%.
GLD with 48 days to go remains on course with probability at 85%
SPY with 48 days to go also remains mostly on course with an 80% probability. We might require adjustment on the high side, depending on what the market does Monday.
We use various measures to determine where we are and where we have been. One measure is the Cash Flow on sold options both in and out. For the past week, we collected $9,390 and paid out $3,664, gaining the difference, or $5,726. This is strictly cash and is not the profit and loss.
CASH FLOW: In developing premium collection, we can determine in advance about how much money, or Cash Flow, we would like to collect for the week and then set out to do just that. For example, we could determine we want at least $5,000 a week, or $260,000 a year. We must keep in mind that our NET will be less than $260,000 because of position adjustments and buy backs at the 80% level.
PROFIT & LOSS: With those factors in, the net “take” drops to $208,000. Additional “singularities” will cost us more premium, likely in the area of another 20%, giving our example a net, net of around $156,000, or about 60% of premium collected.
CAPITAL REQUIRED-OPTION MARGIN: We can determine how much margin is required to support $5000 a week in premium collection and how many puts and calls on average actually go to assignment or exercise, leading to the ratio of Margin required to Dollars collected and the time such margin is employed and even the percentage of dollars required for the anticipated assignment or exercise. For the ratio, we use 10:1, which builds in some additional flexibility.
That means, our example would require $50,000 in capital for every $5,000 in premium we collect in a week. Because options often go most of the term to expiration, each week would need to be funded with $50,000, out to five or six weeks, to support the option transactions.
CAPITAL REQUIRED: STOCK MARGIN: We also have to be aware that when selling puts, we set aside via margin the amount of money required if we get put the stock. In call transactions we rarely sell more calls than we have shares but we do have to own the stock. All of this requires capital.
We also employ strategies that use other people’s money to buy stock, raise cash on stock we do not own, and suppress capital required by pushing down the Cost per Share. More about these strategies later.
FROM THE LOG: Monday, July 2, 2012
+2 JUL 49 Puts @ .24
Covered the puts at the 80% level. We placed this order 6/29 GTC, which kept it on the books until the underlying rallied enough to drag down the put prices to our .24 trigger.
We originally sold these puts 6/28 at $1.20.
-3 Aug 65 Puts @ 3.40
With this sale, we have driven Cost per Share down from $73.50 to $51.58. In other words, out of an original investment of $7,350, we have recovered $2,192, in 102 days. Well, almost, because the calls remain open and are actually in the money with 19 days to go. If this rate of recovery continues, we will have a Cost per Share of ZERO in 240 more days.
We must be careful to not count our chickens until they are hatched, so we quote the numbers we do KNOWING that they represent the facts, IF and only IF, the options expire worthless. Subsequent adjustments and sales will drastically affect our statistics, but still the numbers are useful to keep track of where we are at the moment in spite of not differentiating between earned premium and unearned premium, or assignment or exercise.
We have other computer reports to show us earned, unearned, profit per paired transaction (sell with a subsequent buy, or expire, or buy with a subsequent sell), account summaries, etc., but it is the simple Excel spreadsheet that we turn to for a visual to access the impact a proposed position will have on the two most important metrics, Cost per Share and Days to Zero.
RGLD, SLB, CAT, WPZ, JPM
FROM THE LOG: Tuesday, July 3, 2012
Today was mainly another harvest day.
We closed out:
-10 JUL 85 Calls @ .40, or $400
This long option was a remnant of the RGLD condor we did a while back and was finally sold.
+2 Jul 60 Puts @ .26, or $52
This option reached its 80% level and pursuant to our rules we Bought to Close this position.
+2 Jul 80 Puts @ .42, or $84.
This option reached its 80% level.
We added more premium to this position:
-3 Sep 55 Puts @ 4.00, or $1,200
We were assigned:
Assigned Jul 35 Calls.
Received $35 x 200 shares = $7000, plus we keep the call premium.
These calls still had until Friday to run before expiration but today was ex-dividend day and they were in-the-money…an almost certain call. One of our choices yesterday would have been to close out the 35 calls for .17 and re-write the further out strike for .83, netting about $130, PLUS the dividend. As it turns out, we were distracted by other matters and did not get that done.
We can always buy more shares so little harm done.
CHK, NBR, JPM, SLB
FROM THE LOG: Thursday, July 5, 2012
+5 Jul 16 Puts @ .08
We closed out at 80 % earned.
+5 JulW(2) 18 Calls @ 1.58
-5 JulW(9) 18 Calls @ 1.65
We rolled the Jul calls which expire tomorrow and are in the money into next week’s 18 calls. This doesn’t guarantee that these ITM calls won’t be called, however. This was a no cost transaction which may give us 9 more days of life on these options.
-10 Aug 14 Puts @ .68
-5 JulW(9) 34 Puts @ .67
-3 JulW(9) @ .60
Last week we sold $9,390 and bought back $3,576, for a net addition of $5,814, to our premium outstanding.
So far this week we have sold $4,487 in premium and bought back $1,074, for a net gain in premium outstanding (unearned premium) of $3,413.
We would be happy to reply to any questions or comments posted to the site.
Nice trading and good write up about Corporate Office Properties OFC
I am going to take a look at it. I haven't seen much with gold and oil lately. Are you still watching them? Not so much with oil, but with gold I think it's close to dead money. Deflation (especially in other places) even in the face of the federal spending seems to have taken a hold of the world.
With capital gains tax about to go up it would appear many will want to lock in the lower capital gains rate of 2012 which should put a major downward force on the markets.
@RobertWeinstein Robert Weinstein G+