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Page 2 of Covered Call Test
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Next, I entered the data into my Covered Call Computer and checked the yields

Since they are close to my 4% minimum return rule, I went ahead and entered the stock purchase followed by the sale of the options into the computer.  Now I just update the stock prices and current option prices daily (or so) and I always know if I need to make any adjustments to my position.  Here is the latest Calculator View:

Calculator as of Close 16 April
WebTest/WebTest16Apr.jpg

Final look at positions after close on expiration Friday!!!

Explanation:

Step 1 - Candidates identified by scan for proper setups

Step 2 - Entered data for selected stocks into Calculator to ensure meet 4% called and uncalled monthly return (I wanted 4 trades to have more chances of possible adjustments, so I accepted a bit less that 4% return on two of the stocks)

     Called      Uncalled

CYD  8.8%       4.2%

MTZ  4.2%      3.6%

FST  7.9%       4.1%

CNX  4.1%       3.4%

Step 3 - Update data Daily for Current Stock Price and Call Option Buyback Price to see if any adjustments need to be made.

Step 4 - Make adjustments, as desired, when the calculator tells me the trade is ready to adjust according to my preset Rules:

     Mid-Month Rule - if stock down a lot in 1st 2 weeks of trade

     Jim's Buy More Stock Rule - If stock down even more and I feel I want to 'double down' on trade

     Defensive Techniques - If stock price shows will lose money if called away (not possible on initial trade)

     Delta Effect - If stock way up and calculator shows can make 'enough' return if buy back call and sell stock

     Time Decay - If stock up or down but Time decay will still yield enough profit

    

Otherwise, we just wait and see.  In less than 30 days, we will either exipire ITM (in the money) and have made about a 4% gain for the month which equates to 48% annually OR the option expires just a little out of the money, and we will be able to sell more calls next month and get our 4% monthly yield again, OR the stock is  out of the money, but not enough that we made any adjustments but too much to make our 4% gain if we sell more options, so we are left with the Stock.  In this case, we need to employ the Secondary Call Sale technique.  We will use the calculator the help us enter these trades as well.

    

(Click here for Previous Days Calculators)

(Click here for Results of and Comments on This Test of Trading with my Covered Call Method)

I would like the trade to go all month with no adjustments.  If this happens, I will make my 4% or more Return for the month and either have the stock called away, or will be able to sell more covered calls on the same stock.  Only if the Stock price moves more than I like will I have to adjust.  The calculator has all my adjustment parameters built in, so I just wait and see! 

March 26th - calculator indicates near Mid Month Buyback level.  Put order in at $.25, but no fill.  Put in again next day and filled at $.25 to show how this rule works.  I sold for $1.10 and bought back for $.25 for a net gain of $.85.  $.85/$29.96 = 2.8% gain in about a week.  I am now out of covered call, and will put in an order to resell if price bounces back up to $.55 by expiration.  If so, I make more yield - If not, I booked about 80% of possible total yield on original trade and will continue from there.

March 30th - CYD is up about 4$/share - I could unwind this trade now for a 2.7% gain, but I will wait as I'm looking good for an over 8% gain by expiration.  This technique is best used after a secondary call sale when the stock goes way up instead of down making it hard to gain from the erosion of the option value.  In that case, you may wish to exit with a smaller profit to free up the cash and look for a better trade.  The calculator does it's job, though, and notifies us when we are in the profit range.

April 2nd was Good Friday, so markets were closed.  April 5th we have an FST rally that allows Resale of call at $.55.  I added the $.85 original profit to the $.55 for a net Call sale price of $1.40.  This pushed the called yield on FST to 9% and uncalled to over 5%.  Note the nice annulized return.  CYD is still a possible buyback for a 3% yield, but I will still wait for more.

April 16th - Options Expiration Day!!  We had 2 expire in the money and 2 out of the money.  Total Net Return for month was 5.4% Gain!  Click link here to see full Test Results with explanation and comments:

Results of and Comments on Web Test