Systematic Covered Writing

... more than just covered calls!

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Assignment Examples

THE STOCK: ELN - Elan Corporation

POSITION ESTABLISHED DATE: January 27, 2006

ASSIGNMENT DATE: October 19, 2007

COMMENTS: One of the aspects of a longer term position is the fact that the annualized percentage becomes 'real' for positions that have durations in excess of 365 days. This $2,913.99 investment generated new cash at a simple interest rate of 36.49% per year for 630 days.

Notice that the writer maintained the $15 strike price during the entire holding period. 

      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 Gain
27-Jan-06 Initial Stock Purchase Buy 100 ELN @ 14.49 ($1,456.00)      
      ELN Pharmaceuticals Inc.        
27-Jan-06 Initial Call Option Sell Jul $15 call @ 3.60 Rolled 6/27/06 $351.73    
27-Jan-06 2nd Initial Stock Purchase Buy 100 ELN @ 14.50.99 ($1,457.99)      
27-Jan-06 Initial Call Option Sell Jul $15 call @ 3.60 Rolled 6/27/06 $351.73    
Combined $2,913.99 200 @ 14.66 Combined 200 Share Position        
27-Jun-06 Buy Back & Roll Out Buy two Jul $15 call @ 2.10   ($429.50)    
27-Jun-06 Continued Trade Sell two Jan $15 call @ 4.10 Expired 1/19/07 $810.47    
29-Jan-07  New Continued Trade  Sell two Apr $15 calls @ .45 Expired 4/21/07 $100.49    
23-Apr-07  New Continued Trade  Sell two May $15 calls @ 1.15 Rolled 5/07/07 $220.49    
7-May-07 Buy Back & Roll Out Buy two May $15 calls @ .90   ($189.50)    
7-May-07  Continued Trade  Sell two Oct $15 calls @ 2.65 Exercised 10/19/07 $540.49    
19-Oct-07 Stock Assigned Sell 200 ELN @ 15 $2,992.94 $78.95    D&JA
19-Oct-07     Net Cash Gain     $1,835.35 Annualized
630 Days   Annualized     62.98% 36.49%

Remember, there are only two kinds of positions as far as the writer is concerned.  Positions that are CLOSED, like this one, and OPEN or ACTIVE positions, which are simply not finished yet.  In this light, during the 630 day holding period, the writer was not concerned with the fact that on January 25, 2007, ELN traded as low as $11.70, or 20.19% below the cost basis. So long as an investor is committed to being long-term, the 'value' of an underlying stock becomes mute.

As mentioned above, due to the extended duration . . . this holding provided a return that was above the expectations of SysCW.

PLEASE NOTE THAT THIS EXAMPLE IS NOT TO BE CONSIDERED AS A RECOMMENDATION TO INVEST IN ELN 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 suggesting 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 provide for 'educational purposes' for the sole purpose of illustrating the Systematic Covered Writing strategies.

Thank you!

SYSTEMATIC COVERED WRITING
Copyright © 2007. All rights reserved.
Revised: 01/20/08