BACK-to-CASH
Systematic Covered Writing begins with the establishment of Initial Positions. At times, the Initial Call Option will be below the trading price of the stock at the end of the holding period. When this occurs the option is exercised, and the stock is assigned. The position is then back-to-cash. At other times, additional SysCW strategies, such as the Buy Back & Roll Out, are used during the holding period for a variety of reasons.
A key point to the philosophy of SysCW is the understanding that the actual profit or loss of a position is based in 'ifs' until the position is closed. It is only when a position is closed (back-to-cash), that an annualized return can be generated. Until this happens, the cash that is generated may be less than the final profit, or it could be more. This is due to the relationship between the current strike price and the net purchase price of the underlying stock, and the uncertainty of this relationship during the holding period.
This Web page will be used to report the results of closed positions. The stock symbols are linked to the actual position so that you can view this historical information. It is the writer's opinion that in order for an investment philosophy to work in the further, it is beneficial to know that it worked in the past. The best way to evaluate if a philosophy worked in the past is by viewing real closed positions. Note that when calls are sold, the outcome is an unknown. Assignment brings reality to this unknown. Your questions are always welcome . . . rlcoveru@wavecable.com.
2007 Back-to-Cash Examples
| . . . The Assignment Results . . . | |||||
| Duration | Assigned | Stock | Investment | Net Gain | Annualized Return* |
| 238 Days | March 21, 2008 | CREE | $2,563.81 | $310.87 | 18.60% |
| 51 Days | March 21, 2008 | DPTR | $2,036.25 | $291.74 | 83.80% |
| 199 Days | March 21, 2008 | MTH | $1,857.00 | $317.70 | 31.38% |
| 186 Days | March 21, 2008 | MTH | $1,736.00 | $358.70 | 40.55% |
| 165 Days | February 19, 2008 | UTHR | $6,881.91 | $1,277.25 | 41.06% |
| 31 Days | February 15, 2008 | DSL | $2,344.99 | $119.71 | 61.26% |
| 176 Days | February 15, 2008 | NAK | $1,059.00 | $195.72 | 38.33% |
| 164 Days | February 15, 2008 | SA | $2,573.00 | $431.68 | 37.34% |
| 331 Days | January 18, 2008 | AG | $3936.00 | $568.65 | 15.93% |
| 259 Days | January 18, 2008 | AUY | $2,718.98 | $303.47 | 15.73% |
| 361 Days | January 18, 2008 | BLUD | $3,268.00 | $508.42 | 15.73% |
| 52 Days | January 18, 2008 | CIT | $2,365.80 | $108.91 | 31.31% |
| 550 Days | January 18, 2008 | CREE | $1,888.99 | $376.44 | 13.23% |
| 513 Days | January 18, 2008 | EBAY | $2,712.99 | $550.68 | 14.44% |
| 49 Days | January 18, 2008 | ELN | $2,315.99 | $128.70 | 41.39% |
| 276 Days | January 18, 2008 | ELN | $7,351.99 | $1,525.63 | 27.44% |
| 430 Days | January 18, 2008 | ELN | $1,478.89 | $403.32 | 23.15% |
| 486 Days | January 18, 2008 | ELN | $1,569.00 | $385.70 | 18.46% |
| 711 Days | January 18, 2008 | ELN | $1,491.00 | $805.43 | 27.73% |
| 721 Days | January 18, 2008 | ELN | $1,442.00 | $727.92 | 25.56% |
| 78 Days | January 18, 2008 | ESLR | $1,169.50 | $40.22 | 16.09% |
| 274 Days | January 18, 2008 | HOLX | $11,590.00 | $1,559.31 | 17.92% |
| 270 Days | January 18, 2008 | IMCL | $4,196.99 | $487.67 | 15.91% |
| 954 Days | January 18, 2008 | IMCL | $6,945.00 | $2,191.76 | 11.75% |
| 274 Days | January 18, 2008 | INTU | $2,958.87 | $295.81 | 13.32% |
| 267 Days | January 18, 2008 | ISIS | $2,066.98 | $376.46 | 24.90% |
| 172 Days | January 18, 2008 | ISIS | $10,24.99 | $154.73 | 32.03% |
| 178 Days | January 18, 2008 | ISIS | $1,095.99 | $123.73 | 23.15% |
| 1984 Days | January 18, 2008 | ISIS | $1, 605.79 | $1,643.31 | 18.83% |
| 269 Days | January 18, 2008 | KWK | $8,359.00 | $1,100.34 | 17.86% |
| 298 Days | January 18, 2008 | ONXX | $2581.00 | $563.69 | 26.75% |
| 652 Days | January 18, 2008 | ONXX | $2,354.00 | $832.40 | 19.80% |
| 839 Days | January 18, 2008 | ONXX | $5,560.89 | $1,448.98 | 11.34% |
| 274 Days | January 18, 2008 | OVTI | $3,807.97 | $694.19 | 24.28% |
| 443 Days | January 18, 2008 | RHT | $1,660.99 | $413.70 | 20.52% |
| 505 Days | January 18, 2008 | RMBS | $1,597.99 | $496.70 | 22.47% |
| 1053 Days | January 18, 2008 | RMBS | $1,433.00 | $788.66 | 19.26% |
| 51 Days | January 18, 2008 | THOR | $3,857.00 | $436.42 | 50.98% |
| 236 Days | October 22, 2007 | VRTX | $3,134.25 | $548.95 | 27.09% |
| 630 Days | October 19. 2007 | ELN | $2,913.99 | $1,835.35 | 36.49% |
| 626 Days | October 19. 2007 | ELN | $1,525.00 | $754.89 | 28.86% |
| 172 Days | October 19. 2007 | HOKU | $1,047.00 | $166.47 | 33.74% |
| 171 Days | October 19. 2007 | VIVO | $3,036.50 | $570.93 | 40.13% |
| 73 Days | October 15, 2007 | LEND | $703.99 | $438.23 | 311.96% |
| 179 Days | October 15, 2007 | LEND | $1,091.99 | $231.23 | 43.18% |
| 230 Days | September 21, 2007 | IOC | $2,497.99 | $536.70 | 34.10% |
| 35 Days | September 21, 2007 | IOC | $3,676.70 | $146.48 | 41.55% |
| 151 Days | September 21, 2007 | LEND | $2,026.98 | $526.47 | 62.78% |
| 234 Days | September 21, 2007 | NVDA | $3.081.99 | $434.44 | 21.99% |
| 179 Days | August 20, 2007 | ONXX | $2,748.99 | $260.22 | 19.30% |
| 17 Days | August 18, 2007 | IOC | $4,096.98 | $436.44 | 127.83% |
| 33 Days | August 18, 2007 | IOC | $2,568.00 | $316.20 | 136.19% |
| 32 Days | August 18, 2007 | IOC | $2,569.89 | $299.33 | 132.86% |
| 25 Days | August 17, 2007 | IOC | $2,262.99 | $171.71 | 91.05% |
| 21 Days | August 17. 2007 | IOC | $1,960.00 | $104.71 | 64.11% |
| 241 Days | August 17. 2007 | PDLI | $2,081.86 | $212.84 | 15.48% |
| 339 Days | July 21, 2007 | ELN | $1,526.75 | $331.02 | 23.34% |
| 536 Days | July 20, 2007 | ELN | $2,935.00 | $1,479.87 | 34.34% |
| 538 Days | July 20, 2007 | ELN | $4,476.98 | $2,124.35 | 32.13% |
| 535 Days | July 20, 2007 | ELN | $3,055.00 | $1,230.36 | 27.48% |
| 156 Days | July 20, 2007 | ISIS | $1,016.99 | $137.71 | 31.68% |
| 154 Days | July 20, 2007 | ISIS | $1,018.99 | $135.73 | 31.57% |
| 155 Days | July 20, 2007 | ISIS | $1,027.99 | $131.73 | 30.18% |
| 84 Days | July 20, 2007 | JADE | $2,092.50 | $310.93 | 43.80% |
| 177 Days | July 20, 2007 | SNDK | $4,307.73 | $516.94 | 24.75% |
| 177 Days | July 20, 2007 | SNDK | $8,162.48 | $1,287.58 | 32.50% |
| 175 Days | July 20, 2007 | SNDK | $4,229.71 | $507.23 | 25.01% |
| 171 Days | July 20, 2007 | ZEUS | $2,560.00 | $237.68 | 19.82% |
| 150 Days | June 15, 2007 | DPTR | $2,155.82 | $258.84 | 29.22% |
| 226 Days | June 15, 2007 | ELN | $1,458.99 | $287.44 | 31.82% |
| 80 Days | June 15, 2007 | IOC | $2,705.00 | $259.68 | 43.80% |
| 147 Days | June 15, 2007 | JCG | $3,590.95 | $343.20 | 23.73% |
| 177 Days | June 15, 2007 | JCOM | $2,684.81 | $199.81 | 15.35% |
| 137 Days | June 15, 2007 | MOS | $2,088.00 | $241.66 | 30.84% |
| 351 Days | June 15, 2007 | TIE | $3,335.00 | $583.15 | 18.18% |
| 312 Days | May 18, 2007 | GLW | $2,106.83 | $308.61 | 17.14% |
| 58 Days | Apr. 20, 2007 | ONXX | $5,606.98 | $226.41 | 25.41% |
| 53 Days | Apr. 20, 2007 | SNDK | $3,923.99 | $260.62 | 45.74% |
| 52 Days | Apr. 19, 2007 | IOC | $2,424.99 | $139.70 | 69.13% |
| 128 Days | Mar. 28, 2007 | MLS | $1,997.00 | $367.69 | 52.50% |
| 205 Days | Mar. 16, 2007 | NVDA | $2,615.00 | $308.65 | 21.02% |
| 743 Days | Mar. 16, 2007 | SYNA | $4,539.80 | $1,786.01 | 19.33% |
| 1118 Days | Feb. 16, 2007 | CY | $3,320.35 | $1,018.62 | 10.02% |
| 157 Days | Feb. 16, 2007 | RMBS | $1,847.00 | $479.41 | 60.34% |
| 919 Days | Feb. 16, 2007 | YHOO | $2,780.00 | $907.57 | 12.97% |
| 416 Days | Jan. 19, 2007 | AAPL | $6,796.89 | $1,272.25 | 16.42% |
| 466 Days | Jan. 19, 2007 | ADBE | $2,938.00 | $496.65 | 13.24% |
| 338 Days | Jan. 19, 2007 | AMKR | $3,751.95 | $902.69 | 25.98% |
| 590 Days | Jan. 19, 2007 | BLUD | $3,391.90 | $464.49 | 8.47% |
| 237 Days | Jan. 19, 2007 | CELG | $3,917.44 | $607.22 | 23.87% |
| 156 Days | Jan. 19, 2007 | CYBX | $1,538.78 | $206.43 | 31.39% |
| 186 Days | Jan. 19, 2007 | DAKT | $2,597.72 | $335.93 | 25.38% |
| 197 Days | Jan. 19, 2007 | DAKT | $3,007.00 | $427.65 | 26.35% |
| 589 Days | Jan. 19, 2007 | ERTS | $5,344.90 | $766.18 | 8.88% |
| 589 Days | Jan. 19, 2007 | FLML | $3,971.00 | $1,172.89 | 18.30% |
| 193 Days | Jan. 19, 2007 | GOL | $3315.00 | $392.27 | 22.38% |
| 542 Days | Jan. 19, 2007 | JCOM | $4,087.00 | $741.12 | 12.21% |
| 143 Days | Jan. 19, 2007 | KCI | $9,351.99 | $905.67 | 24.72% |
| 492 Days | Jan. 19, 2007 | LEXR | $1250.98 | $510.45 | 30.27% |
| 473 Days | Jan. 19, 2007 | LEXR | $1507.00 | $430.48 | 20.81% |
| 360 Days | Jan. 19, 2007 | LEXR | $4,141.50 | $738.11 | 18.07% |
| 466 Days | Jan. 19, 2007 | LEXR | $1,511.00 | $432.44 | 22.42% |
| 466 Days | Jan. 19, 2007 | OSIP | $2,694.00 | $669.14 | 19.45% |
| 588 Days | Jan. 19, 2007 | PDLI | $3,462.98 | $750.42 | 12.79% |
| 588 Days | Jan. 19, 2007 | QLGC | $6,651.00 | $1,723.34 | 16.08% |
| 466 Days | Jan. 19, 2007 | QLGC | $3,303.00 | $391.63 | 9.29% |
| 380 Days | Jan. 19, 2007 | RMBS | $1,845.90 | $378.79 | 19.71% |
| 688 Days | Jan. 19, 2007 | SNDK | $2,807.00 | $761.01 | 14.81% |
| 484 Days | Jan. 19, 2007 | SBUX | $4,837.90 | $4,837.90 | 26.19% |
| 204 Days | Jan. 19, 2007 | VRTX | $3,007,71 | $556.96 | 33.13% |
*When a call is sold, a premium (cash) is generated. For the vast majority of investors, this premium is then used for other investments, or it is withdrawn for personal use. There are Web sites that suggest using the premium to reduce the cost basis when calculating the annualized return. SysCW contends that this thought process is unsound. One cannot use the same dollars to make a car payment, or to purchase additional shares of stock AND say that these dollars were used to purchase the stock that generated the premium in the first place.
You cannot use the same dollars twice. Having said that, please note that the Annualized Returns listed above are based on dividing the Net Gain by the actual Investment. Again . . . this is because the writer used the cash that was generated for other investments, which means this cash did not lower the cost basis. Needless to say, if the writer wanted to play that game, the annualized returns would be higher, because the investment amount would be artificially lowered. Unless one leaves the cash generated with the calls just sitting in the account, lowering the cost basis by deducting the premium is nothing more than a mathematical illusion.
SYSTEMATIC COVERED WRITING
Copyright © 2005. All rights reserved.
Revised:
03/25/08