Option Assigned Examples

Systematic Covered Writing

... more than just covered calls!

Option Assigned Examples

A few points to keep in mind as you view the examples. These transactions actually took place. Because you are viewing them 'after the fact', you may not be able to establish exactly the same position yourself. Again, SysCW is not suggesting that you enter a similar transaction with any of these examples as not all strategies are suitable for every investor. Nevertheless, Systematic Covered Writing is one of the most conservative methods of investing in individual stock positions. Remember to always do the math. You should know what can happen, that way when it does happen, you will not be surprised! Either the option will be exercised . . . or it won't. You should always be aware of the purpose of the trade.
Position Tracker Columns:

Date - The date the transaction took place. The last entry in this column is the number of days the position was held in the portfolio.

Strategy - Notes about the strategy used.

Position - A brief description of the transactions. Remember, with the Initial Position, you always buy the stock and then immediately sell the call.

Stock Investment - The top figure is the net amount paid for the stock including commissions. The amount received when the stock was assigned (sold) is the last entry in this column.

Cash Generated - This is column lists the cash generated from the sale of the call option, dividends received during the holding period, and the net profit (or loss) from liquidating the stock.

Total Cash Generated - The sum of the Cash Generated column, and the percentage of the total amount invested in the stock..

Annualized - The percentage gained for the period is annualized. The percentage in the Total Cash Generated column is divided by the number of days and then multiplied by 365 days to 'annualize' the return.

			Systematic Covered Writing
			. . . More than just covered calls . . .
			SysCW Position Tracker


Historical Data			Closed Position
				Stock	Cash	Total Cash	Annualized
Date	Strategy	Status	Position	Investment	Generated	Generated	Return
18-Jan-05	Initial Stock Purchase		Buy 100 LSCP @ 29.149	($2,921.90)
			Laserscope
18-Jan-05	Initial Call Option		Sell Jun $30 @ 4.30		$421.73
14-Jun-05	Assigned Call		Sell 100 LSCP @ 30	$2,982.87	$42.97
14-Jun-05			Net Cash Gain			$447.97	Annualized
147	Days		Net Percentage Gain			15.33%	38.07%

NOTE: Call options are expressed throughout this Web site by a three letter month and a strike price. For the position above the 'Mar $25 call' is an abbreviation for - one contract of the March $25 call option.

THE MATH EXERCISE

SysCW uses the expression, make it a 'Math Exercise'. It is important that you not only understand the 'math', but also agree that it is correct. Here is an explanation of the example above.

Investment Column - The stock was purchased for $2,921.90 including all brokerage fees. The lower figure, $2,982.87, is the net amount received when the stock was called. This amount is commonly referred to as the 'proceeds'.

Cash Generated Column - The net premium is $421.73 received from the brokerage firm. The final figure of $42.97 is the net difference between the amount invested in the stock, and the amount received when it was sold.

Total Column - When you add up the figures in the Cash Generated column, you end up with the net, back-to-cash amount or the profit generated with the position. The percentage gain for the investment period is 15.33%. It is computed by dividing the net cash gained by the net investment ($447.97 / 291.90 = 15.33%.

To this point, all the figures are verifiable by confirmations from the brokerage firm. No hype, just the facts. Be sure, the last figure does involve an assumption as explained below. Don't forget this important fact, which applies to any short-term investment strategy! Always know anytime the word if is used there is also a maybe!

Annualized Return Column - In the Date column, on the last line of information is the duration of the position in days. In this example the duration was 147 days. Using simple interest, if you divide the amount gained, by the duration (in days), and then the result by 365 days in a year, you wind up with the annualized percentage rate or APR. WARNING! THE SHORTER THE DURATION, THE LESS RELIABLE THE APR PERCENTAGE. This is because there is an assumption that similar transactions could be executed over the course of a year. This can never be guaranteed, nor should it be assumed. It's just a reference. In others words, the only way to reach an annualized return is IF the transaction can be repeated.

Did the position really generate 15.33% in 147 days? Yes! This is the percentage that is undisputable.

PLEASE NOTE THAT THIS EXAMPLE IS NOT TO BE CONSIDERED AS A RECOMMENDATION TO INVEST IN LSCP STOCK OR ANY OTHER EQUITY. THE INFORMATION IS PROVIDED FOR EDUCATIONAL PURPOSES ONLY. THERE IS NO GUARANTEE THAT SIMILAR TRANSACTIONS CAN BE EXECUTED IN THE FUTURE. INVESTING IN THE STOCK MARKET INVOLVES RISKS, DO SO ONLY WITH A KNOWLEDGE AND UNDERSTANDING OF THE RISKS INVOLVED!

The information provided above is for informational purposes only, and no mention of a particular security constitutes a recommendation to buy, sell, or hold that or any other security, or that any particular security, portfolio of securities, transaction, investment strategy is suitable for any specific person. You further understand that the Covered Writer will not advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the information available on this website may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Always remember that past results are not necessarily indicative of future performance.
These are the terms of use. Why are they here? Because the examples provided are real. The transactions actually took place. The dates are real, the positions are real. Some transactions will have been executed on the day you receive the email. What you are agreeing to, is the fact that in no way is it being suggested that you can, or should, enter a similar position. Why? Because that would be providing investment advice and the Covered Writer is not authorized to do that. There is also no guarantee that similar transactions could be executed at any time in the future. Only licensed brokers are allowed to provide investment advice. Therefore, you are agreeing that the preceding example was provided for 'educational purposes' for the sole purpose of illustrating the Systematic Covered Writing strategies.
Thank you!
SYSTEMATIC COVERED WRITING
Copyright © 2005. All rights reserved.
Revised: 02/05/07