Systematic Covered Writing

... more than just covered calls!

Option Assigned Examples

THE STOCK: Downey Financial Corp

POSITION ESTABLISHED DATE: January 15, 2008

ASSIGNMENT DATE: February 15, 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 because these 'results' include all positions . . .  not just the 'pretty' ones.  

COMMENTS: I really do understand why folks try for that 5% per month . . . really . . . I do!  The only problem is that strategy is rarely established like this one was.  Keep in mind that until the writer actually went back-to-cash with the one-month 5.10% gain, the position provided more than 20% in downside protection. 

There was a subscriber that mirrored this position, and then asked how to protect the stock from being assigned.  In the case of an Initial Position . . . one really strives for assignment to occur!  The exception would be a core holding or a position that for one reason or another is desired.  For all other holdings . . . Initial Position assignment is a good thing!

Others have often asked how to pick the 'right' stock.  By now, you should know the writer's stance in this topic . . . one can, and I often do, sum it up with two words . . . . nobody knows! Yes, there were reasons for selecting this Company, and this time those reasons had some validity.  I will also point out that the 61.26% annualized return is based on being able to repeat a similar transaction 11 more times in a row.  It is the writer's opinion that this is highly unlikely, but we will try . . . as long as the downside protection requirement can be met.

Now that the position is back-to-cash, the writer can look for another opportunity. Let's see . . . DSL is currently listed at $29.11 (February 15th close), and the Mar $25 call would bring in $5.70.  Hummm . . . . that works out to 19.25% downside protection and a back-to-cash return of 49.55% when annualized.  See what I mean about that 61.26% gain?  Having said that . . . 49.55% is not all that bad . . . so I may just 'play it again'.

---

PLEASE NOTE THAT THIS EXAMPLE IS NOT TO BE CONSIDERED AS A RECOMMENDATION TO INVEST IN DSL 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! Bq

SYSTEMATIC COVERED WRITING
Copyright © 2005. All rights reserved.
Revised: 02/18/08