Systematic Covered Writing

... more than just covered calls!

"Systematic Covered Writing is a series of strategies for long-term investors who believe nobody really consistently knows which stock is going to appreciated at any particular point in time. They also believe there are a limited number of possible overall changes in any individual stock's value during a specified period of time and that someday the value of a stock will be higher than when it was originally purchased. Lastly, they understand that their wealth is not emotionally connected to any individual stock held within the portfolio."

Before you begin with this example, you may find it valuable to read the frequently asked questions section and the Glossary on the SysCW website.  Here are the links to  FAQS  and the SysCW Glossary.

NOTE: An audio file is being downloaded.  It will play automatically once the download is complete.

         CECO  Career Education Corp

THE  DATE :    March 25, 2007

THE STOCKS:  Career Education Corporation (CECO) is an educational services company.

THE STRATEGY: Deciding whether to close or continue to hold a position.

THE THEORY:  Today's example is an illustration of position management using Systematic Covered Writing strategies. When stocks appreciate above the initial purchase price, there comes a time when a writer may consider closing the position early. The goal of SysCW is to allow the 'math' to guide the writer through the decision process.

THE COMMENTARY:  This Initial Position was sent to subscribers on December 1, 2006. The SysCW Position Tracker for this position has been extended to present the three plausible choices.

  1. Leave the position as is, with the understanding that it could be closed if cash were needed.

  2. Close the position now and take the profit.

  3. Allow the position to run full term.

      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 25-Mar-07
1-Dec-06 Initial Stock Purchase Buy 100 CECO @ 24.6892 ($2,475.92)     $3,223.00
  Current Price $32.23 Career Education Corp.        
1-Dec-06 Initial Call Option Sell '08 Jan $25 LEAP @ 6.40   $631.73 Email 12/01  
               
  Cash in Hand 25.51%       $631.73  
               
    Doing the Math … if Closed    
               
        Stock Cash Total Cash Value as of
Date Strategy Status Position Investment Generated Generated 25-Mar-07
1-Dec-06 Initial Stock Purchase Buy 100 CECO @ 24.6892 ($2,475.92)     $3,223.00
  Current Price $32.23 Career Education Corp.        
1-Dec-06 Initial Call Option Sell '08 Jan $25 LEAP @ 6.40   $631.73 Email 12/01  
25-Mar-07 Current Ask = $9.60 Close call = -(100 * Ask + fees)   ($968.25)    
25-Mar-07 Current Price = $32.23 Sell Stock = 100 * Price - fees $3,216.00 $740.08    
      Potential Gain     $403.56 Annualized
114 Days   Potential Percentage     16.30% 52.19%
               
               
    Doing the Math … if Assigned    
               
        Stock Cash Total Cash Value as of
Date Strategy Status Position Investment Generated Generated 25-Mar-07
1-Dec-06 Initial Stock Purchase Buy 100 CECO @ 24.6892 ($2,475.92)     $3,223.00
  Current Price $32.23 Career Education Corp.        
1-Dec-06 Initial Call Option Sell '08 Jan $25 LEAP @ 6.40   $631.73 Email 12/01  
18-Jan-08 If Assigned Sell Stock = 100 *$25 - fees $2,482.94 $7.02    
      Potential Gain     $638.75 Annualized
413 Days   Potential Percentage     25.80% 22.80%

Click here   Flash Audio to listen to the covered writer's commentary.

Questions?    rlcoveru@cox.net

PEASE NOTE THAT THIS EXAMPLE IS NOT TO BE CONSIDERED AS A RECOMMENDATION TO INVEST IN CECO 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 © 2006. All rights reserved.
Revised: 02/23/11