C - Close it or Wait

Systematic Covered Writing

... more than just covered calls!

Close it or Wait Example

This is the 'go back to cash' Systematic Covered Writing strategy, which is respectfully named "Close it or Wait". There may be times when cash is needed for a variety of reasons, or it is possible that a stock has significantly appreciated, and the question becomes, should the writer wait for expiration, or should the writer just go back to cash.
As with all SysCW examples, the transactions listed within the information that follows, took place on the dates listed. Note that historical executions of various transactions may, or may not, be repeated in the future.
"REALITY": It is only when a position goes back to cash that the actual 'profit' or loss can be determined. This truly is a case of 'it's not over until it's over". During the active holding period cash is generated. When the position is closed, the net result of buying and selling of the stock is factored into the 'cash generation' equation.

C Citigroup Inc.

THE TRADE DATE : June 19, 2007

THE STOCK: Citigroup Inc. (C)

THE STRATEGY: Close it or Wait?
THE THEORY: Today's example is an illustration of position management using Systematic Covered Writing strategies. More often than not, the writer will establish long-term covered positions. While other strategist suggest short-term positions, which need to be repeated continuously in order to generate the 'expected' yearly profit, the writer tends to establish the longer term holdings for reasons that have been explained previously. One of the benefits of the SysCW system is the added cash that is generated at the time the options are sold.
THE COMMENTARY: In this large IRA portfolio, the writer needed to make a withdrawal, but the portfolio was fully invested. In this example, the 'going back to cash' is not to try and increase the cash generation over time, but rather to make cash available for a withdrawal. After all . . . what good is the money if you can't spend it from time to time?

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

Historical Data			Closed Position
				Stock	Cash	Total Cash	Annualized
Date	Strategy	Status	Position	Investment	Generated	Generated	Gain
13-Jun-06	Initial Stock Purchase		Buy 100 C @ 48.46	($4,847.00)
			Citigroup Inc.
13-Jun-06	Initial Call Option		Sell '08 Jan $50 LEAP @ 4.50	Closed 6/19/07	$449.00	Email 6/13
13-Jun-06			Accounting	($18.00)	($15.45)
25-Aug-06			Dividend Received		$49.00	Email 8/26
25-Aug-06			Dividend Received		$49.00
22-Nov-06			Dividend Received		$49.00
23-Feb-07			Dividend Received		$54.00
25-May-07			Dividend Received		$54.00
19-Jun-07	Buy Calls to Close Option		Buy Jan $50 call @ 6.10		($618.25)
19-Jun-07	Sell Stock to Close Position		Sell 100 C @ 54.1915	$5,412.06	$547.06
19-Jun-07			Net Cash Gain			$617.36	Annualized
371	Days		Net Percentage Gain			12.69%	12.48%

This position was in place for slightly over one year. It was established as a very conservative holding, using a major financial institution. It's not bad when a writer can make over 12% on a 'bank'. Having said that . . .if the writer would have just purchased the stock and not covered it, the position would have generated a greater return. When thoughts like this come to mind . . . don't forget that the writer did have the use of the $449.00 premium for a year.

Obviously, if the writer had known that this stock was going to appreciate from $48.46 to $54.19 in 371 days, it could have been left uncovered. The point? . . . Nobody knows! The cash can now be removed from this portfolio, which was the only reason this position was closed.

Questions? rlcoveru@wavecable.com

PEASE NOTE THAT THIS EXAMPLE IS NOT TO BE CONSIDERED AS A RECOMMENDATION TO INVEST IN NVDA 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: 06/28/07