|
We opened our positions on March 22nd using the signals from my stock screener. On that day, the SPX index (S & P
500) opened at 1159.90. Options expired on April 16th and the SPX closed that day at 1192.13. This means
that this test month was an up month for the general market - the market was up about 2.7%. We had 4 trades on symbols
CYD,MTZ,FST and CNX. Look to the right for each symbols results.
CYD and MTZ both ended up ITM
and we got a nice rate of return of 8.8% and 4.2% respectivelly with our stock being called away. FST gave us a nice
boost to 5.2% with the Mid Month Buyback technique, and the stock is still ours to sell more calls against next month.
CNX only gave us 3.4% since it also went uncalled, but we can sell Calls again for 3.3% to 3.9% gain which is good enough
for me. Bottom line is that the overall market was up 2.7%, but
our 4 trades were up an average of 5.4%, or double the general market. And we would have made at least 4% even if the
market went Down instead of UP. Two of the four stocks were called away which is in line with my average of just over
half being called away, leaving the rest to manage in subsequent months. While this test did not show every nuance of
managing the trades for a month, it did show many of the techniques I use. As
for real money management, I try to put equal amounts of capital into each Trade as I never know which ones will
work and which ones will not. Assume I had a $40,000 account I am using for my covered calls. I would put as close
to $10,000 into each trade as I could - 1000 shares of a 10$ stock or 500 shares of a 20$ stock or 200 shares of a 50$ stock
and then sell the appropriate number of Calls against the stock i.e. 1 Call for each 100 shares of stock. If that were
done in this test case, I would have made 5.4% on $40,000 or $2160. A full year of results like these would be a 64%
Rate of Return garnering almost $26,000 profit for the year. My calculator has the approximate commissions built in,
so this is actual gains net of expenses. The only real risks that need to be manged
are if one of the companies we own stock in goes bankrupt leaving the stock worthless before we have recouped our investment
or a prolonged downturn in the market where we need to manage the positions aggressively. I can live with these risks
for the potential of 40% to 80% rates of return on a regular basis - But you need to make up your own mind.
|
|
 |
|
CYD - Cyd had a big run - in at $14.34 and closing
at $18.93. We sold the 15 Call, so we were in the money and gained $.66 in Capital appreciation and $.60 for the premium
obtained by the initial sale meaning a $1.26 gain or 8.8% on our money in a month. We had the stock called away, so
we are free to look for our next trade.
|
|
|
MTZ - MTZ was basically flat for the month - in at $12.42 and closing at $12.70. We sold
the 12.50 Strike, so we ended In The Money (ITM) gaining our 4.2% of Profit. The stock was called away, so we are free
to look for next trade.
|
|
|
FST - FST went way down very shortly after our entry allowing us to buy back the Call
using the Mid Month Rule at 80% of our theoretical Max gain. It then rallied and we resold the Call and boosted our
Max gain. We got in the stock at $26.96 and it closed at $26.40. We sold the 28 Call, so the Call ended up Out
of the Money (OTM). We made the uncalled rate of return that was boosted to 5.2% by our buyback and resale, and we still
have the stock. Next month, we can sell the May 27 Strike for over a 4% gain called or uncalled, so that will be our
plan.
CNX - CNX was a borderline trade from the start,
as our Max gain was under 4%, but I included it to have my 4 examples. The stock went down a bit with us in at $44.73 and
closed at $42.67. We sold the 45 Strike, so we ended up OTM for a gain of 3.4%. Next month, we could sell the
45 Call for $1.50 which would be 3.9% called or 3.3% Uncalled, which may be fine for us. Or, if we want to, we could
employ the secondary Call sale Rules and sell the July 42 Call for abour $4.20 which is just under a 10% Return and then Try
to Buy it back when it Gets to $2.10 due to time decay or stock depreciation, and net a 5% gain. If this does not happen,
we manage using the defensive techniques. I think I like the 3.3 to 3.9% gain, even though it is a bit under my 4% threshold
because it frees up my money faster, so I will go that route.
|
|
