Systematic Covered Writing

... more than just covered calls!

Option Assigned Examples

THE STOCK: Immucor Inc.

POSITION ESTABLISHED DATE: January 22, 2007

ASSIGNMENT DATE: January 18, 2008

THE RESULTS: The complete history of all Closed Positions is maintained indefinitely in the Position Tracker for each portfolio.  The Tracker data becomes the SysCW evidence manual over time. The results are the results, which means subscribers can gleam the historical merits of the process as the results include all positions . . .  not just the 'pretty' ones.  

COMMENTS: The data indicates that the Initial Call Option expired worthless in June, and that the writer then recovered the position with the '08 Jan $30 call. It was this second option contract that was exercised, which means the position is back to cash.

The vast majority of investors using covered calls do not use the premiums to literally pay for the stock they just purchased.  Yet, there are numerous Web sites that reduce the cost basis with the premium, in spite of the fact that they really never actually do that! Most use the premium, combined with cash from other calls to purchase alternative stock positions. My point is this . . .  unless you actually use the premium to buy the stock, which means you cannot use it for anything else, then you are kidding yourself if you use it twice. 

The cost basis for the stock is the cost basis!  Back in the 90's it was common to use the premium to reduce the cost basis. The IRS got wise to this and changed the rules.  For example, with this position the Jun $30 call that expired in June of 2007 produced a realized capital gain of $471.73, that according to the IRS should be reported as part of the 2007 tax return. One cannot simply wait until the stock is sold and then 'say'  it reduces the cost basis.  So . . . if you cannot use the premiums 100% of the time to reduce the cost basis, why pretend like you do it at all.  The exception would be when the stock is sold the same year the option expires, but whether you reduce one and don't claim the other, or treat them as separate equities, the math works out the same.

In all of the examples presented on this Web site, the stock position are treated as separate equities from option positions.  The equity  gain or lose with in a position is simply the sum of all closed transactions.

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PLEASE NOTE THAT THIS EXAMPLE IS NOT TO BE CONSIDERED AS A RECOMMENDATION TO INVEST IN BLUD 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 © 2005. All rights reserved.
Revised: 01/21/08