Systematic Covered Writing

... more than just covered calls!

Buy Back & Lower Example

The Buy Back & Lower strategy is one to be used by those writers who are willing to increase the risk on a given position. It is an important Systematic Covered Writing strategy as it allows a writer to add additional cash to a position over the same period of time. Caution should be used, for if the stock appreciates above the lowered price, action will be needed to prevent the stock from being sold at the lower price. But . . . that's one of the reasons there is a Buy Back & Roll Out & Up strategy. So . . . this is the 'Do you feel lucky?' strategy that is used under the SysCW philosophy.

IOC Interoil Corp.

DATE: August 30, 2007

Purpose: The rational for the June 28^th Buy Back & Lower can be seen in the additional cash that was generated on that date. Here we are two months later, and the silly stock is now trading above the $30 strike price. Who knows where it will be in January 2008?

			Systematic Covered Writing
			. . . More than just covered calls . . .
		SysCW Position Tracker

Historical Data			Open Position
				Stock	Cash	Total Cash	Value as of
Date	Strategy	Status	Position	Investment	Generated	Generated	30-Aug-07
15-Jun-07	Initial Stock Purchase		Buy 100 IOC @ 38.9199	($3,898.99)			$3,497.00
	Current Price	$34.97	INTEROIL CORP
15-Jun-07	Initial Call Option		Sell '08 Jan $40 LEAP @ 9.40	Lowered 6/27/07	$931.73	Email 6/15
28-Jun-07	Buy Back & Lower		Buy '08 Jan $40 LEAP @ 3.30		($338.25)
28-Jun-07	Interim Trade		Sell '08 Jan $30 LEAP @ 5.40		$531.74	Email 6/28

	Cash in Hand	28.73%				$1,125.22

Regardless of where it is trading in the future, as of today the position has generated over 28% in new cash. In case you forgot . . . on June 29, 2007, this stock traded as low as $17.84! (So much for the value discussion!)
Today, the writer put into action a SysCW Initial Position Switch position just in case IOC continues to trade above $30 in January 2008. Check out this new position established today . . .

			Systematic Covered Writing
			. . . More than just covered calls . . .
		SysCW Position Tracker

Historical Data			Open Position
				Stock	Cash	Total Cash	Value as of
Date	Strategy	Status	Position	Investment	Generated	Generated	30-Aug-07
30-Aug-07	Initial Stock Purchase		Buy 100 IOC @ 34.48	($3,455.00)			$3,497.00
	Current Price	$34.97	INTEROIL CORP
30-Aug-07	Initial Call Option		Sell '09 Jan $40 LEAP @ 9.70		$961.73	Email 8/30/07

	Cash in Hand	27.69%	Buy and Switch			$961.73

IF . . . and this is a BIG IF . . . IOC is trading significantly above $30 in January, the writer will switch the calls. This means the $38.92 purchase will be matched up with the '09Jan $40 LEAP, and today's purchase will receive the '08Jan $30 call. Odds are, the writer will then roll the $30 call in order to increase the percentage of cash generated relative to the $34.48 purchase.

Sounds like fun to me!

PLEASE NOTE THAT THIS EXAMPLE IS NOT TO BE CONSIDERED AS A RECOMMENDATION TO INVEST IN IOC 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 suggested 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 provided 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: 08/31/07