Systematic Covered Writing

... more than just covered calls!

Option Assigned Examples

THE STOCK: Red Hat Inc.

POSITION ESTABLISHED DATE: November 1, 2006

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: Again we have an Initial Call Option that was exercised.  When positions are established, the writer knows that assignment is one of the two outcomes, which does not involve additional transactions executed by the writer. The back-to-cash gain and percentage are calculated and 'known' from the time the position is established, to the day the stock is assigned.

With this in mind, the writer will accept the back-to-cash gain of 20.52% when annualized.  Because this holding had a duration of more than a year, the writer does not have to worry about repeating anything in order to achieve the stated annualized return.

With this position, the writer was able to sell a call with a strike price above the purchase price, which eliminated any 'give back' when the stock was assigned. Needless to say, this was possible because the premium was more than 15% of the purchase price.

As it turns out, RHT has consistently traded above the purchase price since the stock was purchased. The point to take from that fact is that the $17.50 call was not exercised early, even though the stock was trading above $20 on numerous occasions during the holding period.

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PLEASE NOTE THAT THIS EXAMPLE IS NOT TO BE CONSIDERED AS A RECOMMENDATION TO INVEST IN RHT 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: 01/23/08