Combination $CA and BB&RO&Up

Systematic Covered Writing

... more than just covered calls!

	The Combo BB&RO&Up AMD November 13, 2006

In order for there to be a desire to use the Combination Dollar Cost Averaging ($CA) strategy of Systematic Covered Writing there must have been a previous position established. Each time a stock is selected, one of the possibilities of the covered position is that the stock will lose value and the option will expire (your cost basis of the option becomes zero and the option is 'closed').
This example was distributed to subscribers via email and is available here for reference. Once a position is listed as an example, it will be tracked until the stock is liquidated and the position is closed.

THE MATH:


Systematic Covered Writing
… more than just covered calls!


Combo BB&RO&Up: The Math Exercise


	Date of Transaction	Monday, November 13, 2006

	Stock Symbol	AMD		Current Price	$21.15		100	Shares to Add

	Number of Shares	200	Existing January Strike Price		$20.00		$22.50	NEW Strike

	Net Investment	$4,511.90	Ask Price to close Option		$2.45		$2.50	Strike Increase

	Net Cash Generated (1)	$929.47	Bid Price for Roll Out Option		$3.80

	Strategy: Use the Systematic Covered Writing Combo BB&RO&Up strategy.

	Purpose: Prevent an existing option from being exercised, generate cash,
	and attempt to partake in potential capital appreciation of the underlying stock.

	Step 1: The Buy Back	Cash used to close Jan $20 call			$500.50

	Step 2: The Combo	Net cash used to purchase 100 additional shares			$2,122.77		$6,634.67	New Total Investment

	Step 3: The Roll Out & Up	Net cash received from the sale of '08 Jan $22.50 LEAP			$1,128.25

	RESULT:	Today's increase in premiums generated			$627.75	(A)

	Total Cash Generated to Date			$1,557.22

	Net Percentage of the Investment Generated (2)			23.47%

	Net Back to cash Gain if this New Option is Exercised			$1,655.55	(B)		$6,733.00	Proceeds

	Net Back to Cash Percentage Gain if Exercised (3)			24.95%

	Comment: In order to enter transactions, two events should be considered. One is the
	amount of new cash generated via the strategy and the other is knowing what the end
	result would be if the new call is exercised. Those two amounts are listed above as
	(A) and (B). Do the math first . . . then do the transactions if they are merited!

STRATEGY COMMENTS: In order to enter transactions, two events should be considered. One is the amount of new cash generated via the strategy, and the other is calculating and understanding what the end result would be if the new call is exercised. These two amount are listed above as (A) and (B). As always . . . do the math first, and then execute the transactions if they are merited.
Key to data:

(1) This is the total net cash generated from all previous activity within this position.

(2) This percentage is not a profit percentage. It is simply the total amount of cash that the position has generated to date, divided by the net cash investment.

(3) Given that the proceed received from the assignment of the stock (if the option is exercised) is an amount that can be precisely calculated, the net back to cash amount can be calculated. Dividing this amount by the net investment yields the net percentage gain. For this Math Exercise, this back to cash percentage is not an annualized amount because the data does not indicated the duration of the position.

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

(1)	This is the total net cash generated from all previous activity within this position.
(2)	This percentage is not a profit percentage. It is simply the total amount of cash that the position has generated to date, divided by the net cash investment.
(3)	Given that the proceed received from the assignment of the stock (if the option is exercised) is an amount that can be precisely calculated, the net back to cash amount can be calculated. Dividing this amount by the net investment yields the net percentage gain. For this Math Exercise, this back to cash percentage is not an annualized amount because the data does not indicated the duration of the position.